Telecom mergers: Sprint Nextel to buy Virgin Mobile in $483 million deal

In a merger of important US telecom players, Sprint Nextel Corp is set to buy Virgin Mobile USA Inc. According to a joint statement by the two companies, the deal values the equity of Virgin Mobile, the smaller wireless carrier, at $483 million, including Sprint's current 13.1 per cent fully diluted ownership interest stake in Virgin Mobile.

Sprint, the third-largest US mobile service provider, also agreed to retire all of Virgin Mobile USA's outstanding debt when the deal closes, which is expected in the fourth quarter of 2009 or in early 2010. The statement said Sprint expects Virgin Mobile's debt to be no more than $205 million net of cash and cash equivalents by 30 September.

Virgin Mobile's public shareholders will receive Sprint shares equivalent to $5.50 per Virgin Mobile share, subject to a collar of 1.0630 to 1.3668 Sprint shares per Virgin Mobile share. The price is a 31-per cent premium over Virgin Mobile's closing price of $4.21 on Monday.

''This acquisition will strengthen Sprint's position in the growing prepaid segment by bringing together under one umbrella the iconic Virgin Mobile brand with Sprint's successful Boost Mobile business. These complementary prepaid brands, each with a distinctive offer, style and appeal to different customer demographics, will continue to serve existing and prospective customers following the completion of the transaction,'' the statement said.

Dan Hesse, Sprint Nextel's president and chief executive, said, "The acquisition of Virgin Mobile USA positions Sprint for even greater success in the prepaid wireless segment. Prepaid is growing at an unprecedented rate, with consumers keenly focused on value. Virgin Mobile is an iconic brand in the marketplace that will complement our Boost Mobile brand.''

Under the terms of the agreement, Virgin Mobile USA stockholders will receive shares of common stock as well as cash in lieu of fractional shares.