Sprint, Nextel, Virgin... What's next?
The US Federal Trade Commission revealed on Monday, August 24, 2009, that antitrust clearance had been granted to a merger between Sprint Nextel and Virgin Mobile USA Inc. The merger has a considerable proposed value of $483 million.
Antitrust law bans abusive behavior between competitive entities, particularly anti-competitive behavior that may lead to one part dominating the market. It also represses cartels and promotes free trade, and finally is applied to the supervision of joint ventures such as the one between Sprint Nextel and Virgin Mobile USA Inc. United States antitrust law in particular keeps close watch on behavior such as price fixing, bid rigging and questionable market allocation, all in an effort to keep a level playing field that does not place any market sector at a serious disadvantage.
The Kansas-based Sprint Nextel owns and operates the third-largest wireless telecommunications network in the United States, and is in prime position as a Tier 1-network global Internet carrier operating the largest wireless broadband network and serving as the third largest long-distance provider in the US. Formerly known as “Sprint” until a merger with former competitor NEXTEL in 2005, the company’s specialization spreads out across various technological domains, with such ventures as a combination 2G and 3G wireless network and several data options such as Sprint TV, Sprint Radio, Sprint Music on Store and Sprint on Demand.
Virgin Mobile USA Inc. is a New Jersey-based company whose business base is wireless entertainment and cellular telephones. Beginning their operations in the summer of 2002, Virgin Mobile USA became one of the first companies in the Unites States to offer consumers a prepaid cellular service. They were the first prepaid-only provider, and their pioneering stance has managed to net them some 5.38 million users as of 2008. This considerably broad market acquires Virgin Mobile’s services through the Virgin Mobile website or at various retail outlets carrying service packs.
On July 28 of this year, Sprint announced plans to buy out Virgin Mobile; this deal is projected to be a move that allows Sprint a solid foothold in the low-end prepaid mobile market. Sprint has maintained a healthy status of renting space on its network out to Virgin Mobile, and the arrangement has been of notable benefit to both parties. However, the decision to acquire Virgin Mobile seems to be counterintuitive and redundant considering Sprint’s maintenance and promotion of Boost, its own prepaid unit offering unlimited calls for a set monthly fee.
However, since the acquisition gives Sprint much-needed exposure to the prepaid market [customers pay a set fee in advance, which is deducted from their cellular credit on a per-minute basis], it has been suggested that Sprint may see this as a way out of the current predicament of turning a profit on post-paid service. Indeed, prepaid services such as Boost and Leap Wireless have posted strong growth in monthly prepaid services.
Analysts may be justified in pointing out that this is a necessary step for Sprint, especially in light of customer defections that the company has been working to combat over the last few years. Offering more options for service and payment mechanics could indeed be a viable way to increase the company’s free cash flow.
Related posts:
- Sprint vs. Mystery Company: Bidding War on Virgin Mobile Acquisition “Company X” puts itself in a very strategic position in...
- Sprint Moves Forward as iPCS WiMax Lawsuit is Dismissed ILLINOIS – A local wireless company moves forward with a...
- Virgin Mobile partners with Burger King and Warner Music One of the first things I usually do after getting...
- RealNetworks to distribute Sprint ringtones and music Since their inception, ringtones have emerged as true mobile commodities...
- Verizon Gets Exclusive Rights to Pearl Jam Ringtones Even though ringtone sales have been dropping drastically, Verizon Wireless...
Related posts brought to you by Yet Another Related Posts Plugin.
