By Cecilia Kang
Washington Post Staff Writer
Tuesday, July 28, 2009 9:29 AM
Sprint Nextel said Tuesday it has agreed to acquire Virgin Mobile USA in a $483 million stock deal that will boost the company's prepaid cellphone services.
As part of the deal, Sprint has also agreed to pay off Virgin Mobile's outstanding debt of about $205 million due Sept. 30, according to a release.
The takeover comes at a delicate time for Sprint Nextel, the nation's third-largest carrier, which has struggled with customer losses in its main subscription-based cellphone business and in its walkie-talkie-like iDen service inherited from the 2005 merger between Sprint and Nextel. Since the merger, the company has brought in new executives and worked to recover its reputation for poor customer service. The acquisition also comes also as Congress and the Federal Communications Commission have launched reviews of competition in the wireless industry. Consumer groups and smaller carriers have argued that the industry has consolidated with the nation's four biggest carriers -- Verizon Wireless, AT&T, Sprint Nextel and T-Mobile -- serving nine out of 10 cellphone users.
Analysts point to the launch of Palm's Pre, a new cellphone sold and run exclusively on Sprint's network, along with the company's majority stake in high-speed wireless network operator Clearwire as promising signs. Amid the economic downturn, the company has found growth in its prepaid cellphone service, Boost, which doesn't lock customers into long-term contracts.
"The acquisition of Virgin Mobile USA positions Sprint for even greater success in the prepaid wireless segment," Sprint chief executive Dan Hesse said. "Prepaid 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."