Sprint Buys Virgin Mobile USA for $483 Million

Sprint Nextel said Tuesday it will buy out Virgin Mobile USA in a deal that values the small wireless carrier at $483 million and pushes Sprint deeper into the low-end prepaid mobile market. Sprint, which already owns 13.1% of Virgin Mobile, will pay a mix of shares and cash to buy the rest of the company from Richard Branson's Virgin Group, South Korea's SK Telecom and public shareholders. The No. 3 U.S. mobile service also plans to retire all of Virgin Mobile USA's debt, estimated to be no more than $205 million by Sept. 30. Besides consolidating management, some analysts feel the deal will only distract Sprint from where it needs the most help - in postpaid. "We view the acquisition as part of a strategy by Sprint Nextel to continue to diversify itself away from the post-pay business, in which it continues to struggle mightily against Verizon Wireless and AT&T Mobility," Stifel analyst Christopher King wrote in a research note. "However, the prepaid market is becoming increasingly competitive from a price standpoint in the US, and we wonder whether Sprint's recent branding and marketing efforts surrounding the 'fastest 3G network' and its nascent 4G-Clearwire product offering will have much of an impact with its now larger-prepaid subscriber base. The lingering question of what Sprint "wants to be when it grows up" resonates more than ever with us following this transaction announcement."