Sprint Nextel has announced that it is purchasing Virgin Mobile USA. Virgin runs a popular pre-paid mobile phone service in America and Sprint Nextel will add the service to its line already including Boost Mobile.
The agreement to buy Virgin Mobile USA will cost about $438 million including the value of Sprint's existing 13.1% share of Virgin Mobile USA. Sprint reports that as part of the deal it will retire all Virgin outstanding debt, equivalent to about $248 million of net cash and cash equivalents.
Sprint says that the purchase will strengthen its position in the growing pre-paid cellular segment and bring Virgin Mobile USA and Boost Mobile together under one umbrella. The Sprint Nextel pre-paid business will continue to serve customers each branch served before the purchase.
After the transaction closes, the prepaid business will be ran by Dan Schulman, the current CEO of Virgin Mobile USA, who will report directly to Sprint CEO Dan Hesse. Matt Carter will continue to lead Boost Mobile and will report to Dan Schulman.
Hesse said in a statement, "The acquisition of Virgin Mobile USA positions Sprint for even greater success in the prepaid wireless segment. 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.
Schulman said, "Virgin Mobile USA redefined the U.S. prepaid segment when we launched seven years ago. Sprint is committed to growing its prepaid business and this transaction will provide us with the resources and opportunities to compete more aggressively, and strengthen our position in prepaid."
Public stock holders in Virgin Mobile USA will receive Sprint shares at a price equivalent to $5.50 per Virgin Mobile USA share. Sprint Nextel's Boost Mobile has proven to be popular with pre-paid customers in part due to deals like its recently announced $50 unlimited plan. It's not clear if Boost and Virgin will continue to operate under their existing names.