Sprint to buy Virgin Mobile for $483 million

Sprint Nextel said Tuesday that it will buy Virgin Mobile USA for $5.50 per share in a stock deal valued at $483 million.

Sprint already owns 13.1 percent of the prepaid mobile operator. Virgin Mobile is a mobile virtual network operator, or MVNO, which means it uses another carrier's network to offer its service. The company uses Sprint's CDMA network.

The transaction, which is expected to be finalized in the fourth quarter of 2009 or in early 2010, represents a 31 percent premium over Virgin Mobile's Monday closing share price of $4.21.

Sprint also agreed to retire Virgin's outstanding debt when the deal closes. It doesn't expect Virgin Mobile USA's debt to be more than $205 million net of cash and cash equivalents by September 30.

The third largest nationwide wireless carrier in the U.S behind Verizon Wireless and AT&T, Sprint has struggled the past few years since its acquisition of Nextel. It has been plagued by a poor service reputation, and many customers have left the service. The company's new management team, headed by CEO Dan Hesse, has been trying to turn the company around and rebuild its public image. Earlier this summer, the company launched the highly anticipated Palm Pre smartphone on its network.

Sprint reports second-quarter earnings on Wednesday morning.

The acquisition of Virgin Mobile will help Sprint bulk up its prepaid business. Sprint already owns the nationwide prepaid brand Boost Mobile.

Boost Mobile made waves earlier this year when it introduced a $50 unlimited voice and data plan. Virgin Mobile, which is seen as one of Boost's main competitors in the prepaid market, soon followed suit with an unlimited offering of its own.

[WelshMullet]

Only USA, not UK?

[cvaldes1831]

That's what the article says.

No real surprise. Virgin Mobile USA was a joint venture of Branson's Virgin Group and Sprint, just as Virgin Mobile Canada was a joint venture with Bell Canada. The carriers bought out Virgin's interest and keep selling the service under the Virgin brand.

In any case, Virgin Mobile USA is an odd duck, since it's an MVNO running on CDMA-based Sprint. Elsewhere, Virgin Mobile runs on T-Mobile's network, a GSM carrier.

[windooor7]

A mistake The best comany to buy would be Metro pc .They everywhere now like ,Carls juniour. and subways infact next to them. and they are cloged all day. invester better start looking. All they need is an Iphone instance to kill all the strugling companies like sprint.

[monkeyfun14]

Yes just what we need is Sprint to kill the only reasonable phone company and lock you into contracts.

[Vegaman_Dan]

From what I've seen of Sprint's history, they tend to gain customers not by offering quality service, customer support, or products, but by acquisition of smaller rival companies.

One only has to look to Nextel to see what they have done there.

[monkeyfun14]

But mergers also tend to not work well.

[solitare_pax]

If they change the way Virgin Mobile does things, then I'm off to find a new cell phone outfit.

[trentZ2]

Well I guess that explains why my VM prepaid has been dropping twice as many calls as before. This is why I left Sprint in the first place dammit!

[acesup12]

VM's customer already wasnt the best around but Sprints is even worse, this cannot spell good news. If Sprint starts messing around with VM it could be bad but of course Sprint could pull off the miracle and actually do some good like taking VM plan for low income people nationwide, for some reason VM only has it like a certain area, i think southern cali or something, its a great deal i guess thats why they wouldnt take it nationwide they didnt want to lose the money or something but hopefully Sprint improves that.