Sprint Nextel Buys Virgin Mobile USA

Sprint Nextel is buying the US MVNO, Virgin Mobile a total equity value of approximately US$483 million, which includes the value of Sprint's existing 13.1% stake in the company. Following the closing of the transaction, Sprint's prepaid business, which includes its Boost Mobile brand, will be led by Dan Schulman, current Virgin Mobile USA chief executive officer, who will report directly to Dan Hesse, Sprint Nextel president and chief executive officer.

"The acquisition of Virgin Mobile USA positions Sprint for even greater success in the prepaid wireless segment," said Hesse. "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."

The current shareholders are Virgin Group (28.3%), SK Telecom (15.3%), Sprint Nextel (13.1%) and 43.3% listed on the stock market. As of the year ending 2008, Virgin Mobile USA has 5.38 million users.

Following the closing of the transaction, Virgin Mobile USA will continue to license the Virgin Mobile USA brand from the Virgin Group under the terms of an amended and restated Trademark License Agreement. Sprint will pay $12.7 million for the initial term, which will continue through the end of 2021. The agreement contains several renewal provisions that will allow Virgin Mobile USA to extend the term until 2047.

Sprint will also pay Virgin Group approximately US$50 million at closing as payment in full for net operating losses available to be utilized by Virgin Mobile USA in the future under the Tax Receivable Agreement.

In addition, at closing Sprint will retire all of Virgin Mobile USA's outstanding debt, which is $248 million net of cash and cash equivalents as of March 31, 2009, but is expected to be no more than $205 million net of cash and cash equivalents on Sept. 30, 2009.

Last year, Virgin Mobile USA brought rival MVNO, Helio, a joint venture between SK Telecom and EarthLink, for US$39 million in stock.

Posted to the site on 28th July 2009