FTC gives thumbs up to Sprint-Virgin deal
The Federal Trade Commission has backed a proposed takeover by Sprint Nextel of Virgin Mobile USA. That removes the biggest potential obstacle to the deal.
The firms announced the planned merger late last month. If it goes ahead, Sprint (which already owns 13 percent of Virgin) would pay a total of $483 million, which includes writing off existing debts. Virgin currently uses Sprint’s network to provide service to customers and merely acts as a retailer. The proposed deal wouldn’t immediately affect customers, with both firms’ brands remaining separate, though Virgin’s CEO will take over the running of Sprint’s pre-paid services.
The size of the firms involved meant the FTC was required to investigate the merger to see if it could breach antitrust laws. The commission has now noted on its site that it has terminated its investigation early, which means that it won’t raise any objections.
The FTC note did not explain the reasoning behind the decision to approve the deal, which involves the current third and eighth biggest cellphone carriers in the U.S. However, it’s likely that a combination of Virgin’s relatively small size (around five million customers compared with almost 50 million for Sprint), Virgin being a ‘virtual’ carrier without its own network, and the differing priorities of the two firms (Sprint emphasizing monthly plans and Virgin specializing in pre-paid charges) meant the commission didn’t feel it posed a serious threat to competition.
The deal still faces some bureaucratic hurdles as issues involving Virgin’s international licenses mean the Federal Communications Commission will also need to approve the deal. However, that appears likely to be more of a delay than a serious threat.
The deal also needs the approval of a majority of Virgin Mobile USA shareholders. However, with Virgin Group and SK Telecom (which hold 40 percent of stock between them) already backing the deal, that doesn’t seem likely to pose a problem.
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August 27th, 2009
I thought Virgin was a cool brand but I think I have to rethink my view. First I hear about them providing ‘welfare’ minutes to low-income people and now this with Sprint. Those guys are well known only for their terrible service and network. I think I need a new phone…