Virgin Mobile Narrows 4Q Loss; Posts Strong Customer Growth
04 March 2009 - 8:45AM
Dow Jones News
Virgin Mobile USA Inc. (VM) narrowed its fourth-quarter loss and
returned to customer growth in a sign that more people are
considering pre-paid wireless plans.
Reversing two quarters of customer defections, Virgin Mobile
added 216,000 net new users to end the period with a base of 5.4
million. The company's turnaround underscores the increasing
reluctance of consumers to commit to a multi-year service plan
given the uncertainty over the economy.
"As the economy continues to affect the consumer psyche, there
is an appeal to the value and flexibility of not having to lock
yourself in a contract," Chief Executive Dan Schulman said in an
interview on Tuesday.
The Warren, N.J., provider of pre-paid wireless service posted a
fourth-quarter net loss of $4.4 million, or 12 cents a share,
narrower than its year-ago loss of $14.7 million, or 30 cents a
share.
Excluding one-time items including a charge related to its
acquisition of Helio, the company lost 5 cents a share.
Revenue, meanwhile, rose 10% to $326.7 million.
Analysts, on average, expected a loss of 10 cents a share on
revenue of $345 million, according to Thomson Reuters.
Helping Virgin Mobile is the increasing popularity of "hybrid"
plans, which offer a set number of minutes at a standard price
without a contract. When the plans launched a year ago, they
attracted a third of all new customers who signed up. Now, more
than half of Virgin Mobile's customers choose a hybrid plan.
"We plan to double-down on hybrids," Schulman said, adding he
expects double-digit growth in the number of new customers who
choose that option.
The plans have also helped Virgin Mobile reverse a trend of
declining monthly revenue per user. The average revenue per user in
the fourth quarter was $21.14, up from $20.36 a year ago.
The rate of customer cancellations - typically higher for a
pre-paid service - fell to 4.8% from 5.1% a year ago. The cost per
users also increased slightly as a result of the acquisition of
Helio, which offers a higher end contract service.
Virgin Mobile faces stiff competition from Leap Wireless
International Inc. (LEAP), MetroPCS Inc. (PCS), and Sprint Nextel
Corp.'s (S) Boost, all of which offer flat-rate calling plans
without a contract.
Schulman said Virgin Mobile targets a slightly different segment
of customers, but said the lines have been blurring. In the
situations where they've clashed, Virgin Mobile has competed
fiercely, he said.
For the first quarter, Virgin Mobile expects adjusted earnings
before interest, taxes, depreciation and amortization of $30
million to $35 million and free cash flow of negative $10 million
to nil.
For the year, the company expects adjusted Ebitda of $110
million to $125 million, and free cash flow of $35 million to $45
million.
Schulman said there was too much going on in the market to
provide a more comprehensive forecast.
"We only give guidance that we feel we have control over and
good confidence over," he said. "In all other things, we maintain
flexibility."
Still, he remained upbeat. He said the pre-paid market is still
one the few places of growth left in the wireless industry.
-By Roger Cheng, Dow Jones Newswires; 201-938-2020;
roger.cheng@dowjones.com