The loan is currently being syndicated, but is fully underwritten by the bank. Such is the strength of the Virgin brand.
A year on, the company – launched last November – has over 450,000 mobile phone subscribers. They class themselves as the world’s first Mobile Virtual Network Operator.
The word ‘virtual’ is thrown around like confetti these days and is more often than not used in reference to loose alliances and agreements, where the core business is very difficult to pinpoint.
Gow, along with colleagues Tom Alexander, Mobile Virgin’s chief executive, and Joe Steel, marketing director, came up with the business plan while working at One2One. The aim was simple: to make Virgin appear to be the operator of a fifth mobile phone network when in reality they were riding on the back of the One2One network.
‘We didn’t have a network, we had no licence, and were mainly a marketing operation,’ says Gow.
‘But we did have a strong brand, a distribution network, and access to and ownership of content.’
Virgin Mobile is jointly owned by the Virgin Group and One2One, with each partner having put £50m into the venture. Now they have another #150m in the bank and are looking forward to a good Christmas.
Gow, 44, began his financial career as a commercial trainee with drinks giant Scottish & Newcastle, qualifying as a management accountant.
He passed through Hilton Hotels and Perrier before getting the call from One2One in 1995.
As head of business planning he was responsible for leading a £1.2bn re-financing deal to fund One2One’s national network roll-out and re-branding.
‘The £1.2bn of debt was quite mind-boggling, but after five or six years in telecoms you get used to it,’ Gow says of his first exposure to the banking world.
He then went on to become head of finance for One2One’s commercial division, which was essentially the brand in the UK.
In January 1999 he teamed up with Alexander and Steel, both formerly with BTCellnet, setting up in Euston to pull together the Virgin concept.
The JP Morgan deal is certainly a leap of faith for the bank. Essentially, they are investing in a brand.
‘I’m sometimes surprised at how strong the brand is. But suppliers were falling over themselves to offer handsets, even though our purchases are relatively small compared to Vodafone,’ Gow says.
Virgin Mobile claims that no other virtual operator or reseller has achieved bank financing in this way.
The attraction for JP Morgan perhaps lies within the third generation mobile applications that will be coming on stream, combined with Virgin’s global reach.
Gow’s enthusiasm has yet to be dented by the nervousness in the technology market. Shares were hit after Motorola announced a slowdown in growth in demand for mobile phones. Gow cautiously dismisses this. ‘There is still growth in the UK market, and I think we will see two more big Christmases before the market moves to turnover rather than new subscribers.
‘But at this point we will see the third generation networks coming in.’
Virgin Mobile currently employs around 200 people in its London and Trowbridge offices, with the outsourced customer services division having a further 800.
Gow these days does not spend much time looking over the accounts, as he and the rest of his team are involved in the whole business, not just the checks and balances.
He says: ‘We need to get the balance right, getting it done, but getting it done properly.’
But Gow did let slip the real attraction of the Virgin empire. ‘It’s the music.’ Apparently he plays a mean guitar and is the proud possessor of a ’65 strat. Rocking indeed.
WHO PAID WHAT FOR THE THIRD GENERATION MOBILE PHONE LICENCES?
On 27 April 2000, Stephen Byers, trade secretary, announced the lucky winners in the third generation licence auction. In total £22.5bn was spent on acquiring the licences which will allow the operators to provide a far greater range of services over the airwaves. One licence (Licence A) was reserved for a new entrant. The lucky five winners were:
- Licence A – TIW UMTS (UK) Limited: £4.4bn
- Licence B – Vodafone Limited: £6.0bn
- Licence C – BT(3G) Limited: £4.0bn
- Licence D – One2One Personal Communications Limited: £4.0bn
- Licence E – Orange 3G Limited: £4.1bn
Just one half of UK practices have implemented a pricing structure around auto enrolment implementation and advice - with many suffering increased costs
Deloitte's north-west Europe foray; BDO, Smith & Williamson investment paths; Shelley Stock Hutter; and Wilkins Kennedy discussed by editor Kevin Reed on our Friday Afternoon Live broadcast
Accountants should alter their perspective on auto-enrolment to maximise business opportunities, according to Eric Clapton.
Kevin Reed discusses whether new accountancy group Cogital can rival the Big Four...and its likely direction of travel