KANSAS CITY, Mo. (AP) – Sprint Nextel Corp. last week said it had completed its $483 million acquisition of Virgin Mobile USA, boosting its presence in the market for customers who pay for cell phone service month-to-month.
Virgin Mobile shareholders voted in favor of the acquisition, which was announced in July and pays them $5.50 in Sprint stock for each Virgin Mobile share. The deal also includes retiring roughly $223 million of Virgin Mobile's debt.
Sprint Nextel already owned 13.1 percent of Virgin Mobile, which uses Sprint's network to offer service and has 5.2 million subscribers.
Like other so-called "prepaid" vendors, Virgin Mobile primarily appeals to customers who lack the credit or income to qualify for long-term contracts or simply want a bargain over contract-based plans.
The market for these customers has expanded as the economy has forced more traditional wireless customers to search for cheaper plans. Sprint, which is based in Overland Park, Kan., ignited a mini price war in January when it introduced a $50-per-month prepaid unlimited plan under its Boost Mobile brand.
It's unclear how Virgin and Boost will coexist under Sprint, although they have been geared toward different markets – Virgin aimed at teens and 20-somethings while Boost is considered a value brand. The company said customers of both brands won't see any immediate changes.
Other competitors in the prepaid space include No. 4 carrier T-Mobile USA and smaller upstarts like MetroPCS Communications Inc. and Leap Wireless International Inc., which sells under the Cricket brand.
Prepaid carriers are expected to have the most growth potential, as most people who want wireless service in the U.S. and are eligible for a contract have a phone already.
Virgin Mobile shareholders, which include British billionaire Richard Branson's Virgin Group and South Korean carrier SK Telecom, will own about 3 percent of Sprint.
In related news, Sprint Nextel has taken another step toward acquiring wireless affiliate iPCS Inc. The carrier said Friday that more than 12 million iPCS shares, or a majority of the outstanding stock, had been tendered or promised. Under the deal, iPCS shareholders will receive $24 per share.
Sprint said it will be able to acquire the remaining shares of iPCS by Dec. 7 without a vote of the affiliate's shareholders. The total deal is worth $426 million.
Schaumburg, Ill.-based iPCS has the exclusive right to sell wireless service under the Sprint brand in 81 markets in Illinois, Michigan, Pennsylvania, Indiana, Iowa, Ohio and Tennessee.