Sprint Scoops Up Virgin Mobile USA as the Last Major MVNO Gives In
| Jul 28, 2009 | Wireless Services - U.S. | Competitive Intelligence Report
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Analysts: Bill Ho, Eddie Hold
Current Perspective: Positive
Vendor Importance: Very High
Market Impact: Very High
Event Summary
July 28, 2009 -– Sprint announced that it will acquire Virgin Mobile USA for approximately $483 million. Virgin Mobile will continue to operate under its brand alongside Boost Mobile. Virgin CEO Dan Schulman will head Sprint’s prepaid business unit overseeing prepaid strategy and growth. The completion of the acquisition is subject to the customary regulatory approvals.
Analytical Summary
• Current Perspective: Positive on Sprint’s acquisition of Virgin Mobile USA as this is a low-priced deal for Sprint that ensures the carrier maintains its 5 million wholesale base from Virgin Mobile. From Virgin Mobile’s perspective, this is the best outcome available in the increasingly competitive prepaid market (the alternative was likely to be a slow death).
• Vendor Importance: Very high to both Virgin Mobile USA and Sprint. For Virgin Mobile, this deal is clearly the escape route as the company has found it increasingly hard to compete in the past couple of years; for Sprint, this deal protects its (wholesale) subscriber base that it cannot afford to lose.
• Market Impact: Very high on the wireless prepaid market as Virgin Mobile was an iconic brand in that space. By bringing the Virgin Mobile brand in-house, the new Sprint/Virgin will be able to match the aggressive plans offered by Boost Mobile, thus ratcheting up the competition against the major carriers – TracFone, AT&T, Verizon Wireless and T-Mobile – not to mention the smaller prepaid players.
CLIENTS ONLY
Current Perspective
Competitive Positives and Concerns
Recommended Vendor Actions
| Client access - Full report in Wireless Services - U.S. | More information
Recommended Competitor Actions
• AT&T and T-Mobile should consider opening up new prepaid brands and use these brands (without overt linkages to the parents) to counter Virgin, Boost as well as Leap and MetroPCS.
• Verizon Wireless should continue to work with TracFone to disrupt the market, however, it needs to be careful not to let TracFone’s Straight Talk spark a price war that would ultimately be detrimental to the wireless market/margins.
• MetroPCS and Leap should accelerate their discussions on a merger. With attacks from TracFone’s Straight Talk and now two brands from Sprint, both companies need to work closer together beyond its roaming agreements to get economies of scale in purchasing and marketing to effective compete at a national level. As a combined entity, it can be more efficient in building out a national AWS-based network that can give larger incumbents (prepaid and postpaid) a run for their money.
CLIENTS ONLY
Current Perspective
Competitive Positives and Concerns
Recommended Vendor Actions
| Client access - Full report in Wireless Services - U.S. | More information
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