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Virgin Mobile USA deal gives Sprint Nextel prepaid edge

Sprint Nextel on Tuesday agreed to acquire Virgin Mobile USA for $483 million. The figure includes the value of Sprint Nextel's existing 13.1% stake in the MVNO. Virgin Mobile USA piggybacks on Sprint Nextel's network and was formed as a joint venture between Sprint and Virgin Group in 2001.

Following the acquisition, Virgin Mobile USA will become part of Sprint Nextel's newly-formed prepaid business, which will be headed by current Virgin Mobile USA chief executive Dan Schulman and will also incorporate Sprint's Boost Mobile unit.

However, Virgin Mobile USA and Boost Mobile will continue to operate as separate brands, "each with a distinctive offer, style and appeal to different customer demographics," Sprint said.

The deal puts Sprint Nextel in a strong position to benefit from the current market dynamic in the U.S.

The country's prepaid market is booming as the economic downturn means consumers are increasingly shunning lengthy and potentially expensive mobile contracts.

In May Virgin Mobile USA posted an almost threefold increase in earnings to $13.5 million, while revenues rose 2.2% to $337.3 million. Analysts attributed much of the growth to the way the company has reacted to the recession, citing its Pink Slip Protection programme, which provides customers with three months of mobile service for free if they lose their jobs, and its $50 unlimited tariff plan.

"Prepaid is growing at an unprecedented rate with customers keenly focused on value. Virgin Mobile is an iconic brand in the marketplace that will complement our Boost Mobile brand," said Dan Hesse, president and CEO of Sprint Nextel.

The deal also changes the landscape of the U.S. mobile industry, with MVNOs now looking like a dying breed.

Virgin itself swallowed up Helio, a joint venture between SK Telecom and Earthlink that also bought airtime from Sprint Nextel, in August 2008, while a number of niche virtual operators, such as Amp'd Mobile and Disney Mobile ceased operations in the past couple of years.

Youth-focused Boost Mobile was acquired by Nextel as long ago as 2002.

Boost Mobile head Matt Carter will retain his post upon completion of the Virgin Mobile deal, but will report to Virgin's Schulman.

Источник: Total Telecom

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