Sprint To Buy Virgin Mobile USA For $483 Million - InformationWeek

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Sprint To Buy Virgin Mobile USA For $483 Million

Deal would add Virgin's no-contract offerings to Sprint Nextel's Boost Mobile pay-as-you-go service.

Wireless giant Sprint Nextel said Tuesday that it has reached a deal to acquire the American arm of cell network provider Virgin Mobile for $483 million plus debt payments. The price also includes Sprint Nextel's current 13.1% ownership stake in Virgin Mobile USA.

Sprint Nextel will retire all of Virgin Mobile USA's outstanding debt, expected to be no more than $205 million net of cash and cash equivalents as of Sept. 30, upon the deal's closing.

The merger would combine under one roof two of the leading pre-paid cellular offerings—Sprint's Boost Mobile service and Virgin's own pay-as-you-go services. Such plans are popular with teenagers, the elderly, and others who do not wish to commit to annual cell phone contracts.

Other players in the no-contract market include T-Mobile USA , Tracfone, and AT&T's Go Phone offering.

Sprint, the third largest U.S. wireless provider, said it plans to continue operating both the Boost Mobile and Virgin Mobile brands.

"The acquisition of Virgin Mobile USA positions Sprint for even greater success in the prepaid wireless segment," said Sprint Nextel president and CEO Dan Hesse, in a statement.

"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," said Hesse.

The plan calls for Virgin Mobile chief executive Dan Schulman to assume leadership of all of Sprint Nextel's prepaid operations.

Sprint will issue between 81.4 million and 104.7 million shares of common stock in exchange for all of Virgin Mobile USA's common stock, excluding Sprint's existing 13.1% stake. Sprint Nextel shares were off 1.5% to $4.48 in early trading Tuesday on word of the transaction. Virgin Mobile USA was trading up 23% to $5.18.

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