The US antitrust regulator, the Federal Trade Commission (FTC), has approved Sprint Nextel’s planned US$483 million acquisition of Virgin Mobile USA, one of the country’s largest MVNO. According to a report in the Kansas City Business Journal, the approval means that Sprint is on track to close the transaction as early as year-end, though the deal still needs to be passed by Virgin Mobile’s shareholders and other regulatory bodies such as the Federal Communications Commission and the Securities and Exchange Commission. Once completed, Sprint is expected to combine the business with its existing prepaid subsidiary, Boost Mobile. However, Sprint will retain both brands, allowing it to target different audiences. Boost Mobile is likely to continue to target the cost-conscious low-end sector – a segment that is deemed to be thriving due to fears over the US economy – while Virgin Mobile is youth-focused.
According to a recent edition of Wireless Intelligence’s Snapshot, the acquisition instantly establishes Sprint – the country’s third-largest mobile operator – as a major player in the US prepaid market. Prepaid has been a key growth area for Sprint in recent quarters, helping it offset ongoing churn in its contract customer base. According to Sprint’s 2Q09 results, Boost Mobile (which runs on Sprint’s iDEN network) added 938,000 new prepaid customers in the quarter, while its parent company lost 991,000 contract customers. The success at Boost Mobile in the first half of 2009 can be attributed to the introduction of a US$50 monthly plan in January that included unlimited voice calling, text messaging and Internet access on a prepaid (non-contract) basis. The plan has since been replicated by a number of its prepaid rivals and has led to a fierce price war in the prepaid low-end segment in the US.