Sprint, Virgin Mobile agree to settle lawsuits - Mobile World Live

Sprint, Virgin Mobile agree to settle lawsuits

08 OCT 2009

Sprint Nextel said yesterday it has reached a “memo of understanding” that aims to settle a series of shareholder lawsuits threatening to derail its US$483 million acquisition of Virgin Mobile USA. In a regulatory filing, the operator said it and Virgin were releasing additional details about the structure of the deal and the negotiations that led up to the two companies reaching an agreement. In return, the filing said, the plaintiffs in five cases filed in New Jersey state court have agreed to withdraw their lawsuits once a judge approves the settlement and the acquisition is completed. They have also agreed to withdraw two cases filed in New Jersey federal court. The plaintiffs in the cases had initially opposed the acquisition, saying the terms were not in the financial best interest of Virgin Mobile shareholders.

Sprint and Virgin Mobile still face a legal challenge from Sprint affiliate iPCS, whose subsidiaries have asked an Illinois state court to block the acquisition. In addition, Virgin Mobile shareholders and federal regulators must approve the acquisition. Wednesday’s filing also revealed that Virgin Mobile estimates the deal could create more than US$100 million in administrative, sales, customer service, product development and handset subsidy savings over two years. According to a recent edition of Wireless Intelligence’s Snapshot, the acquisition instantly establishes Sprint – the third-largest US mobile operator – as a major player in the country’s prepaid market. Once completed, Sprint is expected to combine the business with its existing prepaid subsidiary, Boost Mobile. Sprint will retain both brands though, 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. 
 

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