Virgin Mobile hit by curse of US MVNO market
14 March 2008
Virgin Mobile hit by curse of US MVNO market
Shares in Virgin Mobile USA took a bit of a battering this week after the MVNO disclosed disappointing subscriber gains in the fourth quarter of 2007.
Virgin, which launched its IPO in September, said that it only added 209,669 net subscribers in the fourth quarter, compared to additions of 613,752 in the previous year. The company had forecast additions of around 400,000.
MVNOs have historically had a poor run of it in the US, but analysts have attributed the poor customer numbers to the economic downturn, given that all of Virgin's customers come from the typically cash strapped prepay demographic, and concerns that the slowdown could get worse is likely to have made investors jittery.
At the close of play Thursday, the company's share price had fallen more than 41 per cent.
Nevertheless, the company shrank its net loss, from $45m in the fourth quarter of 2006 to $17.7m in 2007, and revenues increased to $293.5m from $271m. Churn also dropped 0.4 per cent year on year to 5.1 per cent.
The MVNO, which is about 35 per cent owned by Virgin, leases its network capacity off local carrier Sprint Nextel and the proceeds from the IPO were used to pay off existing debt.
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