Virgin Mobile swings to profit, helped by Helio
NEW YORK (Reuters) - Virgin Mobile USA Inc swung to a profit in the third quarter, despite a tough economy, helped by its acquisition of SK Telecom Co Ltd's struggling U.S. mobile unit, Helio.
Virgin Mobile shares jumped 25 percent and the company, a joint venture between Richard Branson's Virgin Group and Sprint Nextel Corp, said the results proved the success of the Helio deal.
"These results clearly demonstrate that we've done quite a good job in making the Helio customers immediately profitable," Chief Executive Dan Schulman told Reuters on Monday.
But he said customers were checking their account balances more frequently, showing increasing wariness about spending as the economic downturn continued.
"We're at the beginning of what could be a deep and long recessionary period and so I think it would be quite optimistic to think we're coming out of this at the end of 2009. I think that has the potential to go on 18 to 24 months, or longer, before we see a rebound," he said.
Virgin Mobile specializes in prepaid, or pay-as-you go, wireless service and is seen targeting younger and less affluent clients -- a segment many analysts have said appeared vulnerable in a weak economy.
But Schulman said tough economic times made its cheaper services more attractive and the company reported a third- quarter net profit of $4.1 million, or 7 cents per share, compared with a loss of $7.4 million, or 14 cents a share, a year ago.
Earnings before items and the amortization of intangible assets was 8 cents per share, exceeding the average analyst estimate of 4 cents, according to Reuters Estimates.
Total operating revenue rose to $323.2 million, up from $319.5 million a year earlier. Service revenue rose to $305 million compared with its own forecast of $285 million to $295 million.
The acquisition of Helio came with investment from SK and Virgin Group and Virgin Mobile said its total net debt fell to $259 million from $300 million at the end of the previous quarter.
It forecast fourth-quarter service revenues would grow in a range of 6 percent to 9 percent to around $310 million to $320 million.
The company said, however, that average revenue per user in the third quarter fell 2 percent from a year earlier to $20.19.
(Reporting by Ritsuko Ando; Editing by Tim Dobbyn and Andre Grenon)
