Sprint Buys Virgin Mobile
Can Sprint Maintain The Virgin & Boost Brands?

Just when you think the world of prepaid wireless was starting to make sense, Sprint buys Virgin Mobile!  On July 28, 2009, Sprint announced that it acquired Virgin Mobile, one of its competitors, for $483 million in cash and stocks.  This acquisition came as a surprise to most, and raised a lot of questions.  In fact, ironically, the news came only days after publishing new content on Sprint Prepaid Cellular Phones, discussing Sprint's prepaid brands and strategy.  But that's OK, because it's an opportunity for more interesting discussions!  Here you'll find my thoughts around how the purchase of Virgin Mobile could have played out in terms of Sprint's prepaid strategy.  It's interesting to read this in retrospect (i.e. years after this acquisition) to see how I was thinking versus what actually transpired!

Sprint Buys Virgin Mobile - The Most Likely Buyer All Along!
As Sprint's largest MVNO at the time, they already owned 13.1%f of Virgin Mobile USA, so purchasing them outright really made a lot of sense.  Also, if Virgin was shopping around for a better wholesale deal with other carriers (which they were rumored to have been doing), it would seem likely that Sprint could offer the best deal given that part of Virgin's debt was already owed to Sprint, and their phones, platform, etc. were are entrenched in Sprint-land.  Moving to another carrier would have been far more complex, not to mention expensive.

Also, with Boost Mobile, Sprint's pre-existing prepaid brand, doing so well at the time, Sprint was high on prepaid, and with the acquisition of Virgin Mobile it could immediately enter the number two position in prepaid (second to TracFone Prepaid Cellular).  It's interesting to note that Virgin hadn't been doing well.  Around the time of the acquisition they were bleeding customers, probably largely in part due to Boost Mobile's 2009 launch of their $50 nationwide monthly unlimited plan (one of the first of its kind).  Under the fold of Sprint, these two brands would provide tremendous market reach, but would they still compete?  Could they both survive and prosper?


So What Was Sprint's Prepaid Strategy?
According to Sprint's formal announcements at the time, nothing was to change, meaning that they would continue to operate both brands (Virgin and Boost).  In other words, there were no plans to combine the two brands into one.  In fact, as part of the deal, Sprint invested heavily in the purchase of the rights to the Virgin Mobile USA brand until 2014, with rights to extend the license for almost an additional 30 years thereafter.  The Virgin Mobile prepaid brand definitely wasn't going anywhere anytime soon!

Skip to Sprint Prepaid Wireless Multi-Brand Strategy Announcement!

Sprint did state, however, that decisions would be made regarding "streamlining" the prepaid business to yield "synergies."  Translated, this means that you've now got two similar businesses performing many of the same functions, which in turn translates to layoffs.  Yes, despite what anyone was publicly saying at the time, there would definitely be layoffs, consolidation of roles, operations, HR, engineering, product management, etc.  After all, why would they want to spend millions upon millions of dollars every year to develop on two separate platforms, essentially offering the same or similar prepaid wireless services?  Sorry, but that means layoffs, and we certainly saw that occur for the years following the acquisition, including most functional reporting into Sprint headquarters.

What Would The New Organization Look Like?
It was announced shortly after the acquisition that the existing Virgin Mobile CEO at the time, Dan Schulman, was to head up a new "Prepaid Division" for Sprint, and report directly to Sprint CEO, Dan Hesse.  The General Manager and Vice President of Boost Mobile at the time, Matt Carter, was to continue to head up Boost, and report to Dan Schulman.  Dan S. would also be responsible for continuing to head up the Virgin Mobile brand/division.  In other words, there was to be no counterpart for Matt on the Virgin side.

So just to summarize, Sprint buys Virgin Mobile and Dan, who heads up a declining Virgin business, was appointed to head up Virgin along with the entire Sprint prepaid division, while Matt, who heads up the growing and profitable Boost division, was to continue in his role with only a change in reporting structure.  Yup, sounds like a raw deal, but not to take anything away from Matt, if you compare the resumes of these two executives, you'll see why Dan was "the chosen one."  of course, we later saw Matt get reassigned to the 4G team, and Dan S. resign.

Sprint Buys Virgin Mobile & Shakes Up Its Strategic Prepaid Options!
There are a number of scenarios that could play out as Sprint continued to review how to manage its two prepaid wireless brands.  While I'm sure there are others, the options described on the following pages are some that immediately came to mind following the acquisition announcement.  Note that I've also updated each section with the current state of affairs!

NEXT - Sprint Acquires Virgin Mobile (Continued)


Sprint Buys Virgin Mobile

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