For those of you doubters all I have to say is I told you so ;)
Sprint finally made it official last week, announcing that they had acquired the remaining shares of Virgin Mobile USA (they previously owned 13% of the company) for $483 million in equity. This resulted in Sprint paying $5.50 a share a big premium considering the stock had been selling for less than a $1 earlier in the year.
Considering Sprint just reported a loss of over$388 million in it's last quarter and a loss of about 257,000 subscribers, this deal is a must for the carrier struggling to make ends meet. The one downside to the new subs Sprint is inheriting from Virgin, is that they are much less profitable ones than the post paid customers. On the plus side, removing Virgin as a competitor, helps Boost/Virgin solidify it's space in the price war ridden and fast growing pre-paid space.
Time will tell how this deal actually plays out but on the surface it seems like it could be a smart move for Sprint.
About a week ago I blogged about a rumored buyout by Sprint of Virgin Mobile USA. For those of you wondering if this rumor is true... all I can say is I am fairly certain it is going to happen! Maybe not as fast as I originally stated but it is coming and soon. If I was a betting man I would go with this week or next.
Sprint is desperate and are struggling to add new subs... so the only way they can solidify their position is to get more subs through acquisitions (yes I know that Sprint is the underlying carrier for Virgin but the subs are not technically theirs).
Keep checking back as I will post any updates as soon as they happen!
I heard it from the rumor mill today that Sprint might be working on a deal to acquire controlling interest in Virgin Mobile USA, Inc. I don't know any of the details of the potential acquisition nor do I know exactly when and if this deal will actually go through but it sounds like a deal that would make sense. While I can't site any immediate proof, today Virgin Mobile just executed an amendment letter with Virgin (VEL) granting the company exclusive rights to the names "Virgin Mobile," "Virgin Mobile USA" and "Virgin Mobile Broadband to Go." This move would be of no importance if Virgin Mobile USA was continuing with business as usual!
Sprint is currently the underlying carrier for Virgin Mobile, so integrating their customers into the Sprint systems should be relatively easy. Also with the growth in wireless subscriber count only coming through mergers and acquisitions for the big 4 providers, this deal would certainly be a welcome surprise for Sprint shareholders. The addition of roughly 5 million subscribers to Sprint's true subscriber counts would be a huge move.
This deal, if true, would also remove one of the largest single MVNO competitors in the US marketplace, thus cutting down the competitive landscape. It would be interesting to see if they continue with Virgin Mobile brand name or roll everything into their Boost Mobile prepaid brand name.
So stay tuned to see what happens!
Well the phone card business just had yet another big shot across the bow! MetroPCS is now offering unlimited international calling to over 1,000 destinations worldwide for just an additional $5 a month (you must be using either their $40, $45 or $50 plan to qualify). The destinations are mostly those in the 1 cent per minute category like most European land lines, Argentina, Hong Kong and many others. They have been very careful not to advertise the locations and do not post them on their web site. In order to see if the destination you need is included, you must enter in the complete telephone number you want to call in a look up tool they provide.
Prepaid Mobile has probably been the biggest contributor to the decline in the phone card market, with seemingly better attention paid to the international caller, a market for which the post paid companies still refuse to address. Not only has prepaid cellular helped to get recent credit challenged immigrants cell phones, it is now becoming one of the preferred methods to make international calls. I can't say I blame somebody either, straight dialing is much easier than having to worry about buying a phone card and then entering in all of those pin numbers before every call.
I wonder if Boost Mobile, who has seen great success with their $50 a month unlimited package (700,000 new subs in one quarter since announcing the plan), will counter this MetroPCS with a similar international calling add on package? If they do, they can easily negate any market advantage gained by MetroPCS's international plan.
Virgin Mobile USA, once touted as the shinning star of the MVNO industry, fell below the $1 a share mark back in December and as a result received notice from the NYSE that it would be delisted for failing to meet the minimum requirement of a share price of $1. In order to remain listed, Virgin submitted a plan of compliance to the NYSE on Demeber 24th.
Just this past week the NYSE had announced that it had accepted Virgin Mobile's plan and that they would receive until May of this year to bring their stock price back above the $1 a share mark. Their shares have been hovering around $0.80 since the beginning of the year but the 4th quarter earnings will be released on March 3rd and that should give an indication if they will be able to remain a publicly traded company or not!
If Virgin should for some reason end up being delisted, it is by no means an end for the company but it will be tough for Virgin to continue to operate at the levels they had been in years past. They have already implemented staff reductions and will no doubt have to continue to cut back if they can't remain listed.
Locus Telecommunications announced last week that it has signed a deal with Best Buy to sell it's prepaid wireless Universal SIMcards and recharge cards, branded O2 Wireless, at all Best Buy locations throughout the USA.
"With this new O2 Wireless service, cost-conscience consumers can ditch their expensive cell phone contracts and purchase as much or as little airtime they want."
The SIM cards work with any unlocked GSM phone and is ideal for business traveler and students who do not need the heavy cost of monthly plans and want something for which they only have to pay for what they use! O2Wireless also has a very significant coverage area supporting all major metro areas and much of the East Coast and West Coast (they do not have much coverage in the Midwest.
This deal is sure to be huge for Locus as it will give their MVNO business a huge amount of eyeballs which is relatively hard in todays comepetitve landscape.
Prepaid mobile leader Virgin Mobile announced their Q3 earnings last week and while the numbers didn't blow anyone out of the water, they were rather encouraging. They rang up about 323.2 million in sales in Q3 with about 4.1 million of that in profit, not bad considering last quarter they made $3.6 million on $317.4 million in sales. Slightly less sales from last quarter but they manged to keep more from less, indicating a stronger operational efficiency and higher ARPU numbers (they average somewhere just north of $20 per month per user).
To show that Virgin is committed to maintain a more efficient workforce in these tough times they also announced that they would be cutting their workforce by 10 percent (roughly 45 jobs) in the coming quarter. While these cuts are not as bad as we see in other industries and companies, the mere suggestion of cutting jobs always leads investors and shareholders to loose confidence. The result of this announcement caused shares to fall by about 10%.
View Full Details About Virgin Mobile's Q3 Filing
A year or two ago the concept of paying for someones overseas prepaid mobile phone did not exist. If you wanted to do this you had to wire money via Western Union to your family or friend and trust that they would spend the money on their mobile phone top up. But let's be honest, a lot of people had problems with the fact that the money was not always being used on essential items like it was supposed to! Now we are starting to see the beginnings of an industry that will provide people with a piece of mind, by allowing them to pay for their friends or families prepaid mobile phone service from right here in the US.
The service is being called Mobile Top-Up and works much like a money remittance type of program except that the funds are going instantly to the mobile phone company to pay for the service. The product is usually sold online, but is also starting to be sold in card form at convenience stores. The amount of international mobile phone providers participating in these types of programs are limited right now, but as the concept gains in popularity, more and more are likely to enter the fray.
A few companies I could find on the web offering such a service are:
ARYTY - Company owned by Gorilla Mobile offering top-ups for Philippines mobile carriers and just recently adding India Mobile carriers to their product line.
EZETOP (Offering Top-Ups for just about all Caribbean countries) - Available online or through Blackstone Touch-N-Buy Kiosks
CYBERPLAT - A Mobile Top Up company facilitating mobile top ups throuout Russia, Kazakhstan and the Ukraine.
MORE MAGIC - A mobile payment platform provider that just partnered with Vendtek, a provider of automated transaction software company to distribute mobile-top ups through Vendtek's existing base.
IDT INTERNATIONAL MOBILE TOP-UP - While there is no mobile partners clearly listed on their site it appears as if they have some mobile carriers signed up if they are offering this service.
*********************
Note - Here are some interesting articles on mobile payments and value transfer and another white paper from Atos a Mobile payment enabler.
In what looks like a very cool move Virgin Mobile and the Philadelphia Soul of the Arena Football League, announced that they will be holding a free concert in the Philadelphia area to celebrate the recent win by the Soul in ArenaBowl XXII. So far they have only announced that Bon Jovi will be performing but are said to have others as well.The Soul are owned by Rocker Jon Bon Jovi and a consortium of others so it only makes sense that Bon Jovi would headline the event. Full details of who, what, when and where are supposed to be announced this week.
This will be the first of special promotions that Virgin Mobile and the Philadelphia Soul will be doing together and is expected to continue through the next 2009 season with Virgin Mobile subscribers getting priority access to events like this and other Soul activities and games.
I am not completely sure yet but it may be that the only way to get into this free concert is through being a Virgin Mobile customer or at least getting someone who is a Virgin Mobile customer to get you the tickets.
A very cool tie in promotion... koodos to Virgin for this unique approach to youth marketing!
The last few months have been a trying time for MVNO's in the US, with many companies like Emabrq, Movida and Sonopia closing it's doors and others like kajeet rapidly downsizing. Clearly one of the few MVNOs that managed to succeed (an I use that word loosely) is Virgin Mobile, but even they are having a tough time as of late adding subscribers.
If you look at the wireless industry in the US as a whole, it is clear why MVNOs are having a difficult time:
1) Post paid wireless companies like Sprint are now offering flat rate all you can eat plans. They are a bit expensive right now but that price will drop considerably over the coming years making prepaid services less necessary to help users manage their spending.
2) Rapidly changing handset technology and the coolness factor of phones is what usualy drives a customer to a particular brand or service. This has always been the achilles heel for MVNOs, as they generally have less variety and are usually forced in to lower cost phones to keep their entry costs low and appealing. The iPhone in particular is what is causing youth oriented MVNOs like Virgin Mobile USA a lot of problems.
3) Not owning the actual customer and just renting time from one of the big three will always be a major hurdle. Verizon or Sprint will never provide pricing to the MVNOs to allow them to compete with their own retail brands... they will let them get close but never ahead!
4) Data plans are gaining ground and traditional MVNOs have either not had a data type plan or did not have competitively priced plans in the past (most still don't even have the handsets to support it).
In the end I think we will see only a handful of well positioned players in the MVNO business who managed to overcome and address all of the above issues. I will even take it a step further and say that in 5 years we will not see any MVNOs left as those that managed to survive are bought out by the major players like Verizon, Sprint and T-Mobile who will have no choice but to gobble up these companies to grow their subscriber base in a completely saturated market.
I know this is not exactly prepaid news but it is a big enough deal in the overall US telecom world to deserve mention here!
Verzion Wireless, after 2 years of toying around with the idea, has agreed to acquire Alltel for $5.9 billion in cash as well as assuming $22.2 billion of their debt. This deal, when closed, will make Verizon Wireless the largest mobile provider in the US overtaking the current top spot from at&t. Alltel currently has 13.2 million customers and Verizon has about 66.8 million which will bring the total to 80 million subs just slightly ahead of at&ts 72 million subscribers. The merger should not yield the same problems that the Sprint/Nextel deal did since both companies use the CDMA (code division multiple access) cellular technology, so integrating the networks should not be a huge issue.
Regulators in the Department of Justice and the Federal Communications Commission will still need to review and approve this deal and if approved the deal should mostly complete by December of this year.
There is some discussion going on at the Federal and State levels about the issue of requiring identification for the purchase of prepaid cell phones. Up until now individuals could walk into any outlet and buy a prepaid cell phone with complete anonymity, a big selling point for this type of service. However, this same anonymity also causes the phones to be popular with drug dealers, terrorists, and illegal immigrants. Many retailers have begun to restrict the number of phones that can be bought at one time to help curb illegal uses but there is no law requiring this to be done.
Senator John Carona from Texas is leading the charge in trying to require government issued ID to be shown and recorded by retailers in order to purchase prepaid mobile phones. He is also proposing to make it law that no more than 3 phones can be bought at one time. These laws, in his opinion, will help curtail criminals from using these phones.
As you can imagine prepaid cellular phone companies like Virgin Mobile USA are fighting hard against this, citing the fact that they have always worked closely with law enforcement to provide the necessary info to help fight back against these criminals. Prepaid cell phone companies state that the bulk of their users are law abiding citizens who value the level of anonymity and privacy that these phones offer. So why should we penalize the majority for what the minority do?
Another major objection to the laws comes from the cost associated with having to gather and store each and every users personal info. Retailers would have to enter in data to the providers database with every sale and providers would have to spend millions to build and maintain this database. The cost would ultimately have to be passed along to the consumer by paying higher prices for the service.
Even if this bill never sees the light in the Federal governement, many states like Michigan, New Jersey and others are considering their own bills to combat the criminal usage patterns.
Read the full article here
The practice of illegal handset trafficking has long been a thorn in most Prepaid cellular phone companies side but as of yesterday Virgin Mobile managed to get the first conviction of an individual involved in this type of practice. Muhammad Mubashir of Texas was convicted in the Texas courts of being in criminal contempt for attempting to export mobile phones to China in violation of an injunction entered against him by the U.S. District Court of the Southern District of Texas in a civil case brought by Virgin Mobile USA. L.L.C.
The handsets, which are usually sold at a loss in order to acquire customers, are bought by the traffickers and then not used with the service but shipped overseas to be sold as a low cost mobile phone to be used with the local carriers. As a result prepaid mobile companies like Virgin Mobile and TracFone, expecting to generate the minute revenue to make up for the hardware loss, have experienced poor huge financial losses instead.
On May 9 last year, an Immigration and Customs agent and a Border Protection officer examined a shipment at Eagle Global Logistics being exported by a company owned by Mubashir, Americas Wireless, to Yeng Fung Trading Company in Hong Kong. The shipment contained 46 Virgin Mobile cellphones, all made by Nokia (model 2115i), that displayed the Virgin Mobile name and logo. An injunction was issued to prevent him from continuing the process but he choose to disobey that injunction and kept up the practice which resulted in his conviction on contempt charges.
View the full story here
Helio Mobile was formed a few years back with Earthlink in an attempt to try and gain a share of the US prepaid mobile marketplace, but has been loosing considerable amounts of money on this venture almost since the start and they just have not been able to grow the subscriber base enough. The guess is that SK Telecom is looking for a way out of this money looser and Virgin seems to needs the subscriber growth... so the marriage seems to make sense. The logical step, should this deal go through, is that the Helio brand would disappear and everything would be transitioned over to the Virgin Mobile product line. Since they are both using the Sprint network then the transition should be easy and relatively painless for both Virgin and Helio customers.Meijer, who operates 181 supercenter stores throughout Michigan, Ohio, Indiana, Illinois and Kentucky, has announced that is has partnered with Fusion Mobile, an Austin Texas company to provide a private label MVNO product to be sold exclusisevy in all of their stores.
The product is called Meijer Mobile and has it's backbone provided by Sprint PCS. The phones will be completly prepaid and will include the usual no credit checks and no contracts but will also include a few attractive freebies like unlimited nights and weekend minutes, domestic long distance, cheap text messaging, voicemail, caller ID, and three-way calling. Some of the other benefits will include web access for only $0.20 a day, $0.10 text messages and cheap calls to Mexico (only $0.025 per minute).
Currently they are offering hardware from LG and Samsung which includes the LG 125 for $69.99, the LG 150 for $99.99 and the Samsung M300 for $129.99.
The phones are available now for purchase in stores or online.
In more bad news for the prepaid business Virgin Mobile USA is rumored to be considering cutting roughly 100 of it's 400 total personnel. The 1/4 of total work force reduction is mostly due to poor performance in it's last few quarters and a shift in the companies strategies to outsource more of it's operations to outside parties.
Virgin is still denying that any final decision has been made and is continuing to review it's overall business strategy.
You can read the full article here
