Last month Sprint made an agreement to acquire Virgin Mobile for $483 million. Shortly after that announcement, Virgin Mobile announced their second quarter profits. Virgin said that their popular $50 unlimited plan was the reason why second quarter profits were driven to $16.8 million. In terms of the number of subscribers, Virgin Mobile lost many of them. About a year ago, Virgin Mobile’s profits was only $3.5 million.
Virgin Mobile also said that they plan to shift away from the $49.99 plan by the end of the year. “Our new $49.99 Unlimited offer has been particularly successful, representing 21% of all gross adds in May and June,” stated Virgin Mobile CEO Dan Schulman. “Supporting this strategic customer focus is the sale of higher-priced handsets, which are associated with higher data usage, better churn, and significantly higher lifetime value.”
The company lost 269,239 customers in the quarter. Revenue for the quarter was $307.6 million. In the same quarter the year before, the company reported $319.9 million.
Before the acquisition, Sprint and Virgin Group formed Virgin Mobile in 2002 as a joint venture. Sprint has been a primary provider of the Virgin Mobile network ever since.
Sprint has agreed to acquire Virgin Mobile USA for $483 million. Sprint already owns 13 percent of Virgin Mobile. It is buying the carrier to expand its prepaid operations.
Sprint has been struggling to keep its contract subscribers from moving to larger carriers such as AT&T. Its prepaid service, Boost Mobile, however, has been successful. Boost offers a prepaid unlimited plan that has been a hit with the lower-end mobile prepaid market. Virgin Mobile USA is one of Sprint’s largest prepaid competitors. It has 5.2 million customers.
The deal is a stock-swap deal that values Virgin Mobile at a 31 percent premium over its Monday closing price.
Sprint plans to keep the brand’s name and CEO.
The prepaid mobile market is lucrative but highly competitive. In an economic climate where cash-strapped consumers are looking for ways to cut costs, prepaid cell plans are luring consumers in by offering no credit checks and low monthly costs.
Virgin Mobile USA has announced the availability of the Samsung mantra (SPH-M340) mobile phone on their network. The design of the phone is a clamshell flip form. The Mantra has a 2″ 128×160 LCD screen with 96×96 display. The phone also has a VGA camera and 4x digital zoom. The phone has Bluetooth capabilities as well.
Some of the social networking features built in to the phone includes a connection to MyPix, Facebook, MySpace, Flickr, and Photobucket. The phone is available in a pay-as-you-go plan along with a monthly plan. The phone is priced at $59.99.
AOL sent out a press release today stating that Virgin Media has joined the Open Mobile initiative set up by Bebo, the social network that was acquired for $850 million in March 2008. The Open Mobile initiative is a way for mobile operators, developers, and manufacturing companies to build mobile versions of the Bebo social networks with their brand on it.
As part of the agreement, Virgin will be creating the Bebo Open Mobile Internet website with Virgin’s brand on it and they will also be putting bookmarks for Bebo on the pre-releases of their devices. Virgin customers will be able to easily access Bebo’s mobile services right out of the box.
“Virgin Media’s decision to embed Bebo in their customer experience plays to both of our strengths and joins two great brands. In partnership with Virgin Media, we will be able to deliver great mobile content to more users in the UK,” stated Sean Kane, VP of Mobile at AOL People Networks.
Virgin Mobile’s Dan Schulman CEO stated at the Mobile Virtual Network Operator that the company plans to introduce a new line of touch-screen phones in the near future. Schulman did not give any specifics on when they would unleash the touch-screen, but stated that they stayed out of that market before since many consumers cannot afford these devices.
“Things like value and flexibility are moving to the forefront,” stated Schulman. “I think the economy is helping people to appreciate our model.”
Schulman believes that even though the iPhone and BlackBerry phones are getting a lot of attention, they still only account for 20% of the phones sold. This would be a very different move for Virgin because they are used to selling prepaid phone services. Last year Virgin acquired Helio, a struggling entertainment mobile virtual network operator company.
“It wouldn’t shock me to see more pricing pressure coming into the industry,” added Schulman.
A couple of new phones have popped up on Virgin Mobile’s website, powered by Kyocera. The first handset is the S1300 Melo (JAX) — its not much of a feature-crammed phone at all. As a matter of fact, the only thing it really has going for it is a color screen. The X-tc phone has a lot more goin’ on. It has a sliding QWERTY, QVGA display, a 1.3 megapixel camera, Bluetooth, and Facebook/MySpace applications built-in.
