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Last Updated: Monday, 24 October 2005, 15:06 GMT 16:06 UK
Virgin and Carphone set sights on France
By Jon Cronin
BBC News business reporter

Sir Richard Branson
Will Sir Richard be able to charm the French?

Virgin Mobile and Carphone Warehouse have announced plans to break into the emerging market for "virtual" mobile phone services in France.

The UK companies say they are in talks to set up a Mobile Virtual Network Operator (MVNO), mirroring Virgin's services in Britain and taking advantage of Carphone's stores in France.

The joint venture, which could be up and running early next year, would operate under the Virgin Mobile brand and use the nationwide mobile network of French market leader Orange to carry its calls.

A tie-up between Virgin and Carphone would also bring together two of Britain's best known mobile entrepreneurs, Sir Richard Branson and Carphone chief executive Charles Dunstone.

The announcement by the British duo comes as a quiet revolution is taking place in the French mobile market.

Big three

France has been slow to open up to virtual operators, or MVNOs.

The country's mobile sector is dominated by just three operators - France Telecom's Orange, Vivendi's SFR and Bouygues Telecom. They have traditionally been keen to protect their market share.

Virgin is well known - it's not as well known as in the UK, there are no Virgin trains in France - but the music shops are a known consumer brand
Stephanie Pittet, senior telecoms analyst at Gartner

But pressure from regulators - and the threat in some quarters of legal action - has seen the big three sign deals allowing other firms to offer services by piggy-backing on their established mobile networks.

The process is already popular in the UK, where Virgin leads the virtual mobile market using the T-Mobile network.

Majority owned by Sir Richard's Virgin group, Virgin Mobile currently has more than 5 million customers.

Rival UK budget services are also offered by the likes of supermarket giant Tesco and Easygroup boss Stelios Haji-Ioannou.

Playing catch-up

Virgin and Carphone's joint venture would see both companies try to capture a slice of France's mobile market which, in terms of users, trails behind other European countries.

The French mobile penetration rate - the number of people who own mobile phones - currently stands at about 75%, compared with a Western European average of 97%.

"There is growth potential in France," says Paris-based senior telecoms analyst Stephanie Pittet, of research group Gartner.

"The regulator had to push France's mobile network operators to open up to the MVNOs."

Although not the first virtual mobile operator to plan services in France, Virgin and Carphone's offering would certainly be among the most high profile.

And some analysts believe the joint UK venture could eventually become France's fourth-biggest mobile operator.

International brand

Carphone, which is Europe's biggest mobile phone retailer, has already tested the waters in France, with a local operation using Orange's network in Brittany.

Through its Phone House stores, the UK group is one of France's leading independent High Street mobile phone retailers.

Virgin, meanwhile, brings to the table its experience of running mobile services in the UK and the US. Virgin Megastores in France would also be used to promote the new mobile service.

"Virgin is going to go after the youth and music market - it's a growth market," says Ms Pittet.

"Virgin is well known - it's not as well known as in the UK, there are no Virgin trains in France - but the music shops are a known consumer brand."

With French television and radio media groups recently signing deals to set up youth-focused mobile services, the British joint-venture will find itself up against growing competition for the attention of France's teenagers.

But unlike the heavily developed market at home, France offers Sir Richard and Mr Dunstone's companies the chance to capture a relatively fresh market.

"It's an interesting time," says Ms Pittet. "With a bit of luck, all these MVNOs are going to generate new growth in France so we'll catch up with the rest of Western Europe."

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