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Sprint buys Virgin Mobile USA – stop the bleeding

Sprint is buying Virgin Mobile USA for no more than $688 million.  It’s a great deal for Virgin and a “stop the bleeding” move for Sprint.

Over on TMCNet, I wrote about Virgin Mobile USA’s Broadband2Go prepaid mobile broadband offering For occasional Sprint EVDO users, Broadband2Go is sorely tempting and cheaper than the Sprint phone-as-modem (PAM) deal.  A Sprint customer pays $480/year for a PAM plan,  while the Broadband2Go deal requires a one-time purchase of an EVDO USB frob  at $150, plus usage at $20 per 250 MB on a 30 day use-or-lose basis.

Since Virgin Mobile is/was a Sprint MVNO customer, a Sprint data customer would get the same coverage area and presumably the same QoS through Virgin Mobile.   Crunch the numbers and Sprint’s ARPU on such a customer goes from $40/month to $0.  Purchasing Virgin Mobile means Sprint gets some pre-paid revenue to make up for the PAM drops which in some respects is “better” revenue (better margins baked in, few people use all of the data in 30 days),  but net-net meant Virgin Mobile USA would be cannibalizing some of Sprint’s own customer base.

Broadband2Go is currently the only prepaid mobile data offering in the U.S.  Be interesting to see if Verizon Wireless goes beyond its “day pass” concept with pre-paid devices and rolls out a similar product by the end of the year.

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