By Allen Tsai | Tue Jul 28, 2009 6:24 am |
Sprint said it will buy Virgin Mobile in a stock deal valued at $483 million to expand its prepaid service and bring together the brand with its current Boost Mobile business.
Sprint, the No. 3 U.S. mobile service, also agreed to retire Virgin Mobile's outstanding debt when the deal closes, which is expected in the fourth quarter of 2009 or in early 2010.Virgin Mobile primarily targets consumers who lack the credit or income to sign long-term contracts or simply want a bargain over contract-based plans. It has 5.2 million subscribers who pay an average of $20 per month. Verizon Wireless and AT&T are grabbing the more profitable contract subscribers while Sprint and T-Mobile are left to compete for prepaying customers with smaller upstarts like MetroPCS and Leap Wireless. Prepaid carriers are expected to have more room to grow than contract-based services, because the pool of people who are eligible for contracts but don't already have a handset is shrinking rapidly. Sprint said it would keep the Virgin Mobile brand. Its prepaid business will be run by Dan Schulman, current Virgin Mobile CEO. It plans to issue between 81.4 million and 104.7 million shares in exchange for all Virgin Mobile common and preferred stock.
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