Sprint Nextel is intensifying its focus on the fast-growing market for prepaid cellphone service with a $483 million deal to buy Virgin Mobile USA vm.
The acquisition announced Tuesday calls for Sprint to pay $5.50 in stock for each Virgin Mobile share. Sprint s already owned 13.1% of Virgin Mobile, which uses Sprint's network to offer service.
The offer is a 31% premium to Virgin Mobile's closing share price Monday of $4.21.
Virgin Mobile resells access to Sprint's wireless network for people who lack the credit or income to sign monthly plans. It has 5.2 million subscribers who pay an average $20 a month. Sprint has 49.1 million subscribers, including those using the network through wholesalers like Virgin Mobile.
The deal reinforces this year's main trend in wireless: The top two carriers, Verizon Wireless and AT&T, are grabbing the high-value contract customers, while Nos. 3 and 4, Sprint and T-Mobile USA, are left to compete for prepaying customers with smaller upstarts like MetroPCS Communications and Leap Wireless International.
Sprint roiled the industry by introducing a $50-a-month unlimited prepaid plan in January under its Boost brand. That made for an awkward relationship with Virgin Mobile, which had an $80-a-month plan. In April, Virgin Mobile introduced its own $50 plan after negotiations with Sprint.
Virgin Mobile's stock started the year at 84 cents, but news of the unlimited plan sent it zooming, and it continued its climb after the carrier posted a rare profit for the first quarter, even though it lost subscribers.
Sprint said it would keep the Virgin Mobile brand. Dan Schulman, Virgin Mobile USA's CEO, will run Sprint's prepaid business when the deal closes late this year or early next.
Sprint plans to retire Virgin Mobile USA's outstanding debt, which is expected to be no more than $205 million, on Sept. 30.
Virgin Mobile shareholders will own about 3% of Sprint. British billionaire Richard Branson's Virgin Group owns 28.3% of Virgin Mobile. South Korean carrier SK Telecom has a 15.3% stake that it got when Virgin Mobile last year bought Helio, another prepaid carrier that uses Sprint's network.