Sprint Nextel announced this morning that they will purchase Virgin Mobile USA. The company, which specializes in prepaid mobile phone service, started as a joint venture between Sprint and Virgin, and Sprint owns 13% of their stock. Virgin Mobile USA phones already use the Sprint network.
Why would they do such a thing? To remove and acquire a competitor in the growing prepaid mobile market.
According to the Wall Street Journal:
As consumers tighten their belts amid an economic slowdown, more people are gravitating toward cheaper pre-paid plans that don’t require lengthy service contracts. The U.S. pre-paid market is expected to grow by a compounded annual growth rate of 3.9% through 2014, according to market research firm Atlantic-ACM. The firm estimates that Sprint and Virgin Mobile combined control 17% of the market.
The deal is a $483 million stock swap, and will be finalized in early 2010.
Sprint Expands Pre-Paid Ops With Virgin Mobile Buy [Wall Street Journal]
Sprint to Buy Virgin Mobile USA [NY Times]