US network Sprint Nextel last week agreed a $483 million (£295m) deal to acquire MVNO Virgin Mobile USA to boost its position in the prepay market.
The deal, expected to conclude by early 2010, will see Sprint purchase the remaining shares of Virgin Mobile, which it currently has a 13.1 per cent stake in.
Sprint Nextel will acquire more than 5.2 million Virgin Mobile USA customers and is expected to continue using the brand, alongside its own joint-venture prepay service, Boost Mobile.
Virgin Mobile USA currently runs off the Sprint Nextel network. Its purchase and integration would enable Sprint Nextel to make significant savings on operational costs such as administration and streamlined distribution.
Sprint’s prepay business will be led by current Virgin Mobile USA chief executive officer Dan Schulman, who will report directly to Sprint Nextel president and chief executive officer Dan Hesse.
Schulman will be responsible for the business strategy and growth of the prepay segment. Matt Carter will continue to lead Boost Mobile and will report to Schulman.
Sprint confirmed it will “retire” Virgin Mobile’s outstanding debt of $248 million as part of the acquisition.
“The acquisition of Virgin Mobile USA positions Sprint Nextel for even greater success in the prepaid wireless segment,” said Hesse.
“Prepay 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.”
Schulman said: “Virgin Mobile USA redefined the US prepay segment when it launched seven years ago. Sprint is committed to growing its prepay business and this transaction will provide us with the resources and opportunities to compete more aggressively, and strengthen our position in prepay.”