Sprint Buys Virgin Mobile - What's to become of Sprint's Boost Mobile prepaid brand?!Just when you think the world of prepaid wireless is 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. Sprint buys Virgin Mobile - 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 a discussion around how the purchase of Virgin Mobile could play out in terms of Sprint's prepaid strategy. Note that while both businesses have agreed to the terms of the agreement, the annoucement that Sprint buys Virgin Moible is still pending regulatory approval, which is said could happen near the end of 2009 or even in the first quarter of 2010. Until we hear otherwise, we'll just have to assume that the deal won't fall through. Sprint Buys Virgin Mobile - The Most Likely Buyer All Along! As Sprint's largest MVNO, 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 deal with other carriers, 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. are 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, Sprint was high on prepaid, and with the acquisition of Virgin Mobile it can immediately enter the number two position in prepaid (second to TracFone). It's interesting to note that Virgin hadn't been doing well. Around the time of the acquision they were bleeding customers, probably largely in part due to Boost Mobile's 2009 launch of their $50 Monthly Unlimited plan. Under the fold of Sprint, these two brands will provide tremendous market reach, but will they still compete? Can they both survive and prosper? Sprint Buys Virgin Moible - So What's Sprint's Prepaid Strategy Now? According to Sprint's formal announcements, nothing changes, meaning that they will continue to operate both brands. In other words, there are no existing 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 isn't going anywhere anytime soon! Sprint did state, however, that decisions will 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 will publicly say at this point in time, there will 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? They don't! Sorry folks, but that means layoffs. I expect it will take the better part of a year before there's any idea/announcements regarding what the new organization will look like. Sprint Buys Virgin Mobile - What will the new organization look like? Existing Virgin Mobile CEO, Dan Schulman, will head up a new "Prepaid Division" for Sprint, and report directly to Sprint CEO, Dan Hesse. Current General Manager and Vice President of Boost Mobile, Matt Carter, will continue to head up Boost, and report to Dan Schulman. Dan will also be responsible for continuing to head up the Virgin Mobile brand/division. In other words, there's 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, will head up Virgin along with the entire Sprint prepaid division, while Matt, who heads up the growing and profitable Boost division, will continue in his current 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." Oh well... Sprint Buys Virgin Mobile & Shakes Up Its Strategic Prepaid Options! There are a number of scenarios that could play out as Sprint contemplates how to manage their two prepaid wireless brands. While I'm sure there are others, the options described on the following page are some that come immediately to mind. If you have any others, or if you have any comments on this options discussion, please submit your feedback (see the next page); myself, and other visitors to the site would love to hear what you think!
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