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  1.    #1  
    Sprint Nextel to buy Virgin Mobile

    MarketWatch.com Story
    My Phone & My Wife's Phone Two Unlocked GSM Treo Pro's

  2. efudd's Avatar
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    #3  
    I’m not an MBA or anything- so can someone explain to me WHY this makes sense?

    They buy time on sprints network- right? So sprint isn’t getting any better coverage?

    None of the subs have contracts- so they are getting no locked in clients- right? They can all run away to other prepaid services at a moment’s notice can’t they? These are typically more price sensitive subs without fancy cell phones that they invested in- so they aren’t locked to the carrier say like someone who spent 200 bucks on a pre- right? Sprint can’t even keep their contracted customers from running away how would they keep people with no ties?

    Why not just make their own prepaid service (boost?) as attractive as virgin and then lure away the customers anyway?

    Doesn’t seem to make a ton of sense to me.

    Maybe virgin has international assets?
  3. #4  
    They already own 13% of Virgin Mobile, and Virgin Mobile uses Sprint towers. They are just buying the rest. This makes sense especially considering how many people are dropping post paid (i.e. contract) and going with prepaid. Boost mobile handles the unlimited, and Virgin Mobile handles the needs of people like my grandparents, who are now in their 80's and would only call in extreme emergencies.

    Not to mention the greater than a Billion $ in revenue that would come in through Virgin Mobile.

    ATT has theirs; Verizon has theirs; now Sprint has theirs.
    Last edited by pogeypre; 07/29/2009 at 11:03 AM.
  4. efudd's Avatar
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    #5  
    Quote Originally Posted by pogeypetey View Post
    They already own 13% of Virgin Mobile, and Virgin Mobile uses Sprint towers. They are just buying the rest. This makes sense especially considering how many people are dropping post paid (i.e. contract) and going with prepaid. Boost mobile handles the unlimited, and Virgin Mobile handles the needs of people like my grandparents, who are now in their 80's and would only call in extreme emergencies.

    Not to mention the greater than a Billion $ in revenue that would come in through Virgin Mobile.

    ATT has theirs; Verizon has theirs; now Sprint has the best.

    Again no MBA- but the way I read it is they get 5 million post paid subs which are less profitable and subject to way much more churn.

    For those 5 million subs they are paying ~500 million to buy virgin and then another ~200 million in debt and then paying ~10 million a year for the name which they wont own.

    So that means they will be paying about $140/sub ((500+200 million dollars) /5 million subs) and then 2 ~ bucks a sub a year for the foreseeable future for the name.

    (That doesn’t even take into account the fact that they will no longer be getting paid for Virgin to use their network- so the incremental revenue isn't even equal to complete new sub that they would get on their own, Not does it factor in that they are only biuying 87% of each sub as they already ownb 13%)

    I really have no idea- is 140/sub in SAC (subscriber acquisition costs) a good number for pre-paid customers? It seems kind of high to me. But I have no idea what it costs to market and get your own sub as a cell phone provider. If it only costs 50 bucks in marketing and phone subsidy to get a new customer- then they should just try to market a lot and steal all the pre-paids themselves and it would be a lot cheaper. On the other hand if they routinely pay 200 bucks a sub in marketing and phone susbsidies then this is a bargain.

    Anyone know what typical SAC is? Google's not my friend today- laughing- and i can't find any references.
  5. #6  
    Quote Originally Posted by efudd View Post
    Again no MBA- but the way I read it is they get 5 million post paid subs which are less profitable and subject to way much more churn.

    For those 5 million subs they are paying ~500 million to buy virgin and then another ~200 million in debt and then paying ~10 million a year for the name which they wont own.

    So that means they will be paying about $140/sub ((500+200 million dollars) /5 million subs) and then 2 ~ bucks a sub a year for the foreseeable future for the name.

    (That doesn’t even take into account the fact that they will no longer be getting paid for Virgin to use their network- so the incremental revenue isn't even equal to complete new sub that they would get on their own, Not does it factor in that they are only biuying 87% of each sub as they already ownb 13%)

    I really have no idea- is 140/sub in SAC (subscriber acquisition costs) a good number for pre-paid customers? It seems kind of high to me. But I have no idea what it costs to market and get your own sub as a cell phone provider. If it only costs 50 bucks in marketing and phone subsidy to get a new customer- then they should just try to market a lot and steal all the pre-paids themselves and it would be a lot cheaper. On the other hand if they routinely pay 200 bucks a sub in marketing and phone susbsidies then this is a bargain.

    Anyone know what typical SAC is? Google's not my friend today- laughing- and i can't find any references.
    Owning a 13% share in this company makes you of small importance. Revenue for you is low, even though you provide the framework (i.e. towers/infrastructure) for the company to even exist.

    You notice that the other two major players in the post paid market have wholey owned pre paid services? It makes sense to offer the full range of products, and to reap the rewards of that service. Pre Paid service is a very low margin offering, but it makes market and business sense to get it out as far as you can.

    It's the Walmart principle. Sell 1,000 at low Margin, or sell 10 at high margin.

    Sprint now will "own" the revenue. Even though they take on small debt at first, it's not as if it will not be profitable.
  6. efudd's Avatar
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    #7  
    I'm not necessarily against the walmart mentality. For example Dish network makes plenty of money on the bottom end and Directv aims high end hir ARPU subs and both make a good buck.

    But Sprint ALREADY owns a pre-paid business in Boost and looks like in one quarter they added about 1 MILLION of their own prepaid subs- so my question is why bother buying someone elses and not just build your own better?

    The whole question is is it cheaper to pay 7-800 million for 5 million subs or could sprint just spend say a hundred million more in marketing a quarter in the next year or 2 and get the same or more amount of subs for the buck.

    that's the point- is this the cheapest way to get that many subs. Not if it's a good business to be in. (that's a whole nother discussion)

    So how much are subscriber acquistion costs per sub for sprint's Boost service? Since none of the analysts are calling the deal stupid- I'm guessing it most cost sprint more then 150 or so bucks per new boost sub?
  7. #8  
    Quote Originally Posted by palandri View Post
    Sprint Nextel to buy Virgin Mobile

    MarketWatch.com Story
    Hmmm, I would have thought Sir Richard would have purchased Sprint....



    Phones: Sprint Blackberry Bold 9650, Sprint Blackberry Tour 9630, Nextel Blackberry 8350i Curve (Everything Plus Family Data 1600)



    "When I die bury me deep, put two speakers at my feet, a pair of ear phones on my head, and always play The Grateful Dead."
  8. #9  
    They were already counting VM subs as theirs and VM leased airtime from the Sprint CDMA network. Nothing new to see here... Moving along...
    Phone history with Sprint since April 2001: Kyocera QCP-2035, LG Touchpoint 1100, Samsung i500, Treo 650, Treo 700p, Treo 755p, HTC Mogul, Blackberry 8830, Samsung A900M, Motorola ic902, Blackberry Curve 8330, Samsung Instinct, HTC Touch, Treo 800w, Touch Diamond, Touch Pro, Motorola i9, Treo Pro (personal)/Iphone 3G 16GB (gone to make room for Pre), Palm Pre, blackberry tour, iPhone 3GS 32GB

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