Virgin Mobile USA Q3 earnings beat expectations

Virgin Mobile USA posted higher-than-expected third-quarter earnings Monday, with profits rising to $4.1 million compared to a net loss of $7.4 million a year ago. The quarter coincided with Virgin Mobile's $38 million acquisition [1] of SK Telecom's troubled U.S. wireless unit Helio, a deal that heralded revised rates from network operator partner Sprint resulting in an 8 percent cost-per-minute reduction, roughly 17,000 Helio subscribers and a reduction in net debt totaling between $35 million and $40 million. Three weeks after completing the Helio merger, Virgin Mobile also released Shuttle, its first EV-DO phone with integrated Helio data services offered to both prepaid and hybrid customers.

Virgin Mobile USA reported its average revenue per user for the third quarter was $20.19, down 2 percent year-over-year but up 5 percent from the second quarter. According to Virgin, the sequential growth is the result of continued adoption of the MVNO's new higher cost plans as well as the impact of the Helio deal. As of Sept. 30, Virgin boasted a subscriber base of approximately 5.2 million, a 6 percent increase over Q3 2007, also credited in part to the Helio acquisition. Churn grew to 5.5 percent from 4.9 percent.

"We're seeing strong acceptance of our value proposition," said Virgin Mobile USA CEO Dan Schulman [2] in an interview with FierceMobileContent. "Looking at the current economic environment, people are looking at alternatives to locking themselves into two-year wireless plans. We serve a lot of middle-income and lower-income folks--according to research we've conducted, about 75 percent of them said the economy has already affected them, and they're making choices as a result of that. When we asked them how does Virgin Mobile USA's value proposition appeal to them in this environment, 51 percent of our customer base said it's much more appealing, which is very gratifying to me."

According to Schulman, the grim economic outlook has yet to negatively impact some mobile data behaviors: "People are beginning to substitute voice for text and data messaging--we continue to see that grow," he said. "We've not seen any dent in messaging growth from the beginning of the year." Schulman added that while some data services like mobile video remain stagnant, he expects significant growth for services like enhanced messaging, social networking, community-based applications and location-based efforts, promising the next handful of quarters will see Virgin Mobile USA introduce "innovative and useful new services with applicability in this economic environment."

For more on Virgin Mobile USA's Q3 earnings:
- read this release [3]

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