Virgin mobile loses value in America

14 March 2008 / by Rebecca Sargent
Shares in Sir Richard Branson’s Virgin Mobile USA have dropped in value as much as 87 per cent since its initial public offering (IPO) in October 2007.

Shares were priced at $15 in October, but have recently dropped as low as $1.90. Virgin Mobile USA have announced poorer than expected fourth quarter results and disappointing forecasts for customer growth, falling to quarter subscriber growth of between 5,000 and 20,000. Consequently, analysts have cut its ratings on the stock market from a peer performer to an underperformer.

Virgin Mobile USA began trading in the summer of 2002 and was one of the first companies to offer prepaid mobile phones in America. It is unique in the sense that the company only offers prepaid mobile phone tariffs, targeted at young people who cannot afford a contract. Despite this, competition is fierce for mobile phone companies in America, which is reflected in Virgin Mobile USA’s failure to expand to the extent of the Virgin Media brand’s other companies.

Part owned by the USA’s No. 3 mobile service, Sprint Nextel, Virgin Mobile USA is not the only company that has seen a fall in share prices. As a direct result of Virgin Mobile USA’s results, Sprint Nextel shares fell by 3.7 per cent to $5.99.

Despite the losses, Dan Schulman, Chief Executive Officer at Virgin Mobile USA remains positive, commenting: "We think we have one of the most attractive value propositions in the market, and that our business is well-positioned for the future." Mr. Schulman concluded, "We will continue to simplify and evolve our product and service offers to better serve our more than 5 million customers and to generate increased demand."

Virgin Mobile USA comes under Richard Branson’s umbrella brand Virgin Group Ltd. Entrepreneur; Richard Branson began his empire with a chain of record stores, famously branded as Virgin Megastores before branching out, Virgin Group Ltd now has over 360 companies under its wing.

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