Sprint buying Virgin Mobile, prepaid cellphone provider
— -- The deal ends Virgin's high-profile push into the U.S. wireless market, which is dominated by AT&T and Verizon. The two carriers, with more than 170 million customers, control 65% of all wireless subscribers in the USA. Sprint and T-Mobile have around 20%. The balance is controlled by smaller carriers including Virgin, which has 5 million customers.
Walter Piecyk, a telecom analyst at Pali Research, says it's a good deal for Sprint, which already owns 13% of Virgin Mobile.
"This more than doubles the size of Sprint's prepaid business," he notes.
Virgin Mobile CEO Dan Schulman says the decision to sell was a tough one, but ultimately the right call for the company.
"We didn't do this because we didn't think we'd survive," he says. "We did it because we want to thrive." By teaming with Sprint, he says, "We could really advance our market position in an aggressive way."
Keith Cowan, president of strategy for Sprint, agrees. "Together we can be far more competitive," he says.
Sprint's prepaid division, called Boost, currently competes with Virgin Mobile. Both offer nearly identical $50-a-month all-you-can-eat wireless plans, which have been gaining in popularity as the economy swoons.
The deal is expected to close by the end of the year. Once that happens, the intense rivalry between Boost and Virgin, which has been gaining steam as of late, will go away.
But the Virgin brand won't. Sprint will gain the right to use the Virgin Mobile USA name until 2046. "We think it's a superb brand," Cowan says.
So does Schulman, who will join Sprint to oversee the prepaid business. Schulman, a longtime wireless veteran, will also help set strategy.
He'll report to Sprint CEO Dan Hesse. Both men are alumni of the old AT&T, and they have known each other for more than 20 years.
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