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Virgin Mobile sets up shop in the USA

Pay as you go with Sprint

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Virgin has hooked up with Sprint PCS to take its virtual mobile operator business to the States.

The partners are pumping $150m each into Virgin Mobile USA, as the JV is called, with Sprint providing this mostly in the form of services, and Virgin supplying its share entirely in cash. The service should launch mid-2002.

Virgin has built a successful branded mobile phone service in the UK, on the back of infrastructure supplied by T-Online, and in particular, by targeting pay-as-you-go customers. Analysts and some mobile phone companies, obsessed by ARPUs (average revenues per user), look down upon this segment somewhat – pay as you go is not where the big spenders are.

But this payment method, coupled with heavily-subsidised, for a time, handsets, turned mobile phones into mass market in the UK, reaching out to previously marginal punters. It’s popular with parents, who can control their kids’ phone bills; it’s popular with the elderly, who only turn on their mobile phones when their car breaks down; and it's popular with young adults, who get cheap phones and take advantage of cheap rates to text their mates. A lot.

It’s the young that Sprint is gunning for; with Virgin’s help; it’s "committed to clearly and efficiently penetrating the under-30 pay-as-you-go market in the U.S". Which sounds rude and possibly illegal.

Virgin has also launched Virgin Mobile in Australia. Last week, it announced that it was injecting AUS$68m into this business, to take majority control. Its partners are Singtel and Optus. ®

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