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Sprint Nextel Increases Comission Payments to Virgin Mobile

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Sprint Nextel has changed the terms of its commission payments to its MVNO partner, Virgin Mobile USA which suggests that the firm is taking a more aggressive stance in trying to boost its flagging subscriber base.

According an SEC filing posted last week, Sprint Nextel will increase its payment to Virgin Mobile for each gross new subscriber from US$2.50 to US$4.50 in the last three months of this year. A limit of USD10 million on all payments during the quarter has also been removed.

 The two firms also agreed to lower the access charge that Virgin Mobile makes each year for access to Sprint's CDMA network. Virgin Mobile was due to pay Sprint Nextel at least $320 million, $370 million and $420 million during 2008, 2009 and 2010, respectively, for wireless network services, including voice, messaging and data traffic. Under the new agreement, these payments have been lowered to USD318 million for 2008, and starting next year, the firm will no longer be subject to minimum annual payments and will pay fixed rates for voice, messaging and data traffic that are lower than rates applicable in 2008.

The Company and Sprint Nextel will negotiate rates for 2011 and beyond, but if they fail to reach terms, the rates for 2010 will apply.

In August, Virgin Mobile USA completed its acquisition of rival MVNO, Helio - a joint venture between SK Telecom and EarthLink - and sold to Virgin Mobile USA for USD39 million in an all-shares deal.

Helio added some 170,000 customers to Virgin Mobile USA's own 5 million prepaid customers.

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