Sprint Nextel To Acquire Virgin Mobile USA

Posted by at 10:56 am on July 28, 2009

Sprint Nextel Corporation and Virgin Mobile USA, Inc. announced today that their boards of directors have approved a definitive agreement for Sprint to acquire Virgin Mobile USA for a total equity value of approximately $483 million, which includes the value of Sprint’s current 13.1% fully diluted ownership interest in Virgin Mobile USA. In addition, at closing Sprint will retire all of Virgin Mobile USA’s outstanding debt, which is $248 million net of cash and cash equivalents as of March 31, 2009, but is expected to be no more than $205 million net of cash and cash equivalents on Sept. 30, 2009.

The buyout, if approved by the feds, will make Sprint the clearest leader in prepaid phones and avoids the collapse of the pre-paid segment due to Virgin’s struggling financial health and the recent failures of other MVNOs       Sprint now also controls the Helio brand with completion of the deal.

Following the closing of the transaction, Sprint’s prepaid business will be led by Dan Schulman, current Virgin Mobile USA chief executive officer, who will report directly to Dan Hesse, Sprint Nextel president and chief executive officer. Bringing exceptional telecom leadership credentials to Sprint, Schulman will be responsible for the business strategy and growth of the prepaid segment. Matt Carter will continue to lead Boost Mobile and will report to Schulman.

Sprint used to get a fair amount of income from Mobile Virtual Network Operators.   But these third parties usually pay carriers like Sprint for blocks of voice and/or data to gain access to their networks but don’t generate as much revenue as direct customers.

Sprint already had a 13.1 percent stake in Virgin and the company now says it will use the takeover to unite its entirely self-run Boost service with Virgin under a single roof.

“The acquisition of Virgin Mobile USA positions Sprint for even greater success in the prepaid wireless segment,” said Dan Hesse, Sprint Nextel president. “Prepaid is growing at an unprecedented rate with consumers keenly focused on value. Virgin Mobile is an iconic brand in the marketplace that will complement our Boost Mobile brand.”

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