Advertising costs per customer Industry=from $75 to $100 Virgin planned ad costs = 60 mil/1min= $60 (p.

5) Handset subsidies: Current industry handset cost: $150 to $300 (assume $225) (p.5) Current industry handset subsidy: $100 to $200 (assume $150) (p.9) Current industry handset subsidy as a %: 67% Virgins handset cost: $60 to $100 (assume $80) Assume Virgins subsidy around 30% = $30

Then Virgins AC would be just ____vs. industry average $370 Sales commission: $30 Advertising per gross add: $60 Handset Subsidy $30 Total: 120

Break Even analysis: at what per minute price would Virgin break even: Virgins monthly ARPU: __200P____________ where p=price per minute Assume Virgins customers use 200 minutes per month (midpoint of estimate between 100 and 300, p.7) Monthly cost to serve: ____90P__________ Assume monthly cost to serve is 45% of revenues (Exhibit 11)

Monthly margin: ____110P___________

LTV=(110P/1-.72+.05)-120 (LTV=0) P=25 cents