In what looks to be shaping up to be another healthy week for M&A activity, Sprint Nextel is putting more of its focus on the prepaid cell phone service market with a $483 million deal to buy out Virgin Mobile USA.
The acquisition, which was announced earlier this morning, calls for Sprint to pay $5.50 in stock for each Virgin Mobile share, a 31 percent premium to the MVNO’s closing share price Monday of $4.21. The deal is expected to receive approval either in the fall or in early 2010.
Sprint Nextel actually already owned 13.1 percent of Virgin Mobile, which uses the carrier’s network to offer service to some 5.2 million subscribers. The deal cancels out Virgin’s $248 million in outstanding debts and will unite Sprint’s Boost service and Virgin Mobile under the same roof. Sprint says it would keep the Virgin Mobile brand and let Virgin Mobile USA’s CEO Dan Schulman, run Sprint’s entire prepaid business if and when the deal closes late this year or early next.
In that case, Virgin Mobile shareholders will own about 3 percent of Sprint. Richard Branson’s Virgin Group owns 28.3 percent of Virgin Mobile, while South Korean carrier SK Telecom has a 15.3 percent stake that it got when Virgin Mobile last year bought Helio, another prepaid carrier that uses Sprint’s network.
Virgin Mobile shares jumped to $5.20 in premarket trading on Tuesday, while Sprint shares rose to $4.60 from their close at $4.55.
Sprint continues to expand its reach… who will be next is the real question
Sprint’s becoming a major player in the prepaid market with this and Boost. Maybe that’ll the real future of them, as the postpaid market hasn’t been too kind to them over the last few years.
Stop with the mergers! The cell phone market is becoming an oligopoly. This will be bad for the consumer, preventing free market competition.
Becoming; it seems to have gotten there a few years ago
1 Verizon Wireless
2 AT&T Mobility
3 Sprint Nextel
4 T-Mobile
everybody else either has roaming agreements, use the network of one of the top 4 because there a mvno or is partly owned by one of the top 4; or they are just in a few cities which do no customers any good unless they never travel.
Its still better than the mob tactics the cable companies use where they each got there on turf and you don’t enter the other companies.
I still love the example that was on Colbert, how we once broke up ATT, and how they ended up all back together anyway.
http://herot.ty...ed/attchart.jpg
Totally agree Max.
It’s a terrible merger for consumers … I recently just jumped off of the “Sprint -> ATT -> Verizon -> TMobile” treadmill and this acquisition puts me back onto it.
Garbage.
except you were never off it. virgin was a “virtual” carrier partially owned by sprint and running on their network.
Richard Branson has made some pocket change.
Virgin is attached to lots of companies from the past. Branson maybe already sold out long time ago, but they keep the name.
Wrong. The Virgin Group owns 28.3 percent of Virgin Mobile.
Helio is post-pay, not prepaid. And I’m waiting to see what happens to Helio subscribers out of this whole deal (I am one).
Spring still has terrible service. I lived 2 miles from headquarters in KC, still couldn’t get reception. So I switched to AT&T, ANOTHER poor choice. 3rd time’s the charm I guess.
i really hope that i will become possible to activate a used sprint phone on the virgin service. if so i will pick up a used palm pre and get the unlimited virgin data option.
Sprint’s customer numbers have been stagnating and the company is too big to break up. Allowing third parties to use its network and concentrate on marketing for them allowed Sprint to gain users without spending $300 per head for customer acquisition.
Buying out its marketing partners doesn’t seem like a good use of funds. It already has those network users, at least for the moment.
A better use of Sprint’s managers would be to focus on increasing their ability to leverage customer data across the enterprise and thereby improve customer service, accounts receivables and customer retention rates. With a little bit of effort and silo-busting, Sprint could become a great company.
That’s what I was thinking. As one of the few people left over from Helio (What will happen to me!?), I think it’s kind of funny that all of these services that used Sprint’s towers anyways, are now purchased.
So does that mean that Sprint would get Helio too?
It seems to me that Virgin Mobile acquired Helio and really basically sat on the line. VM didn’t introduce any new devices and really stagnated the growth momentum of that product family.
So I would hope if Spring acquired Virgin that it could begin reinvesting in such a promising line of devices (which is where Sprint really lags behind AT&T and Verizon).
Google should buy Sprint.
Google should just buy the entire internet. Instead of referring to it as “the internet”, we would just call it “The Google” LOL
Boost Moble. Where you at dawg?!
So perhaps they could let the Helio Ocean 2 come out as a Sprint phone?
Bottom line of what i would like to know. After the merger will I be able to use the Helio Ocean 2 phone on a regular Sprint account or on a Virgin prepaid account? or will we still only be able to use the Ocean 2 on Helio’s crummy plans?
Hopefully, they’ll allow direct downloads of apps to improve their existing lineup functionality. Prepaid customers deserve the same convenience and smartphone features as contract subscribers without having to purchase new handsets. There’s too much garbage in the waste stream already.
I have a question about Virgin Mobile. Are they offering a low-cost pan for unemployed and other people who need a basic phone w/o the big bills? I keep hearing that they make a $10 a month plan available for those who can’t afford more but I don’t see it on their site.
Do they have it? If so why don’t they announce it?