Virgin Mobile USA files for IPO

Virgin Mobile USA Inc., the first mobile virtual network operator to launch in the United States, filed for an initial public offering in a move that signals the maturation of the MVNO segment of the wireless market in the United States in general and a notable step forward for Virgin Mobile USA specifically.
Virgin Mobile said that it has applied to have its stock listed on the New York Stock Exchange under the symbol “VM.” Although the company said that “the number of shares to be offered and the price range for the offering have not yet been determined,” a variety of media outlets reported that the IPO could raise up to $100 million.
The firm said it will use the proceeds from the IPO to repay debt and to make an undisclosed payment to Sprint Nextel Corp.
Lehman Brothers, with Merrill Lynch & Co. and Banc of America Securities acting as joint book- running managers, are handling Virgin Mobile’s IPO.
Virgin Mobile USA’s parent companies-Sprint Nextel Corp. and Virgin Group-are selling portions of their respective stakes in the firm. However, Virgin Mobile said that, upon completion of the offering, Sprint Nextel and Virgin Group together will continue to hold a majority of voting power “and will continue to control us.”
In its filing with the Securities and Exchange Commission, Virgin Mobile released detailed information on its business. The firm, founded as a joint venture between Sprint Nextel and the Virgin Group, launched service in July 2002. By November 2003, the MVNO had racked up 1 million customers. As of Dec. 31, Virgin Mobile counted 4.57 million customers, a 19% increase from the 3.84 million customers it served as of Dec. 31, 2005.
As of March 31, Virgin Mobile counted 4.88 million customers.
As for the firm’s customer metrics, Virgin Mobile said its ARPU clocked in at $21.48 in 2006, down from the $22.54 it recorded in 2005. Virgin Mobile’s cash cost per user, or CCPU, was $13.15 in 2006, down from the $14.94 it posted in 2005. Virgin Mobile said CCPU is used to measure and track its costs to provide support for its services to its existing customers.
Finally, the MVNO’s cost per gross addition, or CPGA, was $120.55 in 2006, up from the $118.62 in 2005. Virgin Mobile said CPGA is used to measure the cost of acquiring a new customer.
The MVNO also boasted of its data sales. Virgin Mobile said that 17% of its service revenues for 2006 were from non-voice services, which the firm said was 5% higher than the wireless industry average of 12%, according to the Yankee Group.
As for the firm’s financials, Virgin Mobile said it recorded operating revenues in 2006 of $1.1 billion, up from around $990 million in 2005. The MVNO posted a $36.7 million loss in 2006, down from the $102.9 million loss in 2005.
Virgin Mobile USA’s IPO filing comes on the heels of a number of high-profile IPO efforts in the wireless market, including those from Clearwire Corp. and MetroPCS Communications Inc.