Sprint (NYSE: S) Nextel has agreed to buy Virgin Mobile USA (NYSE: VM) for $5.50 per share or $483 million, combining it with its own Boost Mobile to strengthen its prepaid mobile play.
The two brands would continue to function separately, aiming prepaid services at “different customer demographics”, but would unite “under one umbrella”. They will continue to license the Virgin brand from Virgin Group, under new terms until 2021, costing Sprint $12.7 million. Sprint would also wipe out Virgin Mobile’s debt, which it says was $248 million in March but should be a maximum $205 by September.
Tricia adds: As the economy has gone into a deep recession in the past year, prepaid has really taken off with several providers offering very affordable unlimited plans. It was only a matter of time until consolidation started to take place in the prepaid market. It was a natural fit to have Sprint buy Virgin since it was already using its network. Plus, it gives Sprint a more hip and younger brand to market. Iin the first quarter, Sprint’s better-than-expected performance was driven partly by 764,000 new customers flocking to its pre-paid service Boost Mobile (that runs on its Nextel network) and its popular $50 unlimited plan. Schulman has said previously that he only expects the prepaid trend to increase. In fact, http://moconews.net/article/419-virgin-mobile-usas-ceo-says-over-half-the-population-is-willing-to-cons/” title=”Virgin