The much-anticipated stock offering of Virgin Mobile USA last week didn't live up to its hype. The initial public offering of the cellphone-services company ended at $15.75 a share in trading on the New York Stock Exchange, up 5% from its IPO price. The deal priced at the low end of its expected $15 to $17 range.
Founded as a joint venture between Sprint Nextel and Britain's Virgin Group, Virgin Mobile USA began offering prepaid cellphone plans in July 2002. As of June 30, the company had 4.83 million customers, and had roughly 15% of the pay-as-you-go cellphone market at the end of 2006.
Unlike many cellphone carriers, the company doesn't maintain its own wireless network. It buys network service from Sprint Nextel. The products and services are marketed under the Virgin Mobile brand, and are aimed at the US youth market.
Because the company doesn't operate its own network or stores, Virgin has lower costs than companies that build their own networks. Virgin, however, does subsidize the cost of its cellphones in order to attract new customers at a lower price point.
Its practice of luring customers by subsidizing phones caused a problem: Virgin phones have been purchased, reprogrammed, and resold in bulk for use on other wireless communications networks, cutting Virgin out of the wireless-service revenue it was hoping to attract with each low-priced phone. The lost revenue has been declining recently because of changes Virgin has made to its phones' software, as well as court cases it has won against reprogrammers. (info from The Wall Street Journal)