Virgin, Sprint in Mobile Pact in U.S., Source Says
Richard Branson’s Virgin Group has chosen U.S. telecommunications operator Sprint Corp. as its partner in a proposed $1-billion drive into the U.S. mobile market, an industry source said Sunday.
Sprint beat rivals including AT&T; Corp. to supply the network for a Virgin-branded service based on Branson’s mobile companies in Britain and Australia, the source said.
The airline entrepreneur believes he can leverage his company’s brand name to break into the relatively immature U.S. market, where only 40% of people have mobiles compared with up to 70% in Europe.
Branson has signed up more than 865,000 customers in Britain through a joint venture with Deutsche Telekom’s One2One, targeting the youth market that shops in Virgin record stores and drinks Virgin Cola.
But Virgin has found in the past that its brand does not necessarily buy it success in the United States. It had a hard time launching Virgin Cola in the U.S., and will be competing with six major nationwide mobile telecom brands.
The 50-50 mobile venture hopes to stand out from the crowd by teaming up with U.S. consumer electronics retailer Best Buy Co, the source said. Best Buy will sell the service, drawing on the experience of Virgin’s V-Shops in Britain, which sell mobile phones alongside CDs and videos.
A Virgin spokesman refused to confirm the deal.
“We’re progressing with talks in the U.S. and we expect to be able to announce a deal soon,” he said.
Branson is investing an initial $13.82 million in the U.S. venture, the source said, which could eventually cost the partners $1 billion. The money was raised from a loan secured against Branson’s 51% stake in Virgin Atlantic Airways.
Branson has a revolving credit facility secured against the financial assets of Virgin Atlantic that he regularly draws on, the spokesman said. Branson sold the remainder of the airline to Singapore Airlines Ltd. last year.
Virgin Mobile began in Britain and expanded into Australia, where its partner is C&W; Optus.
