WASHINGTON (Reuters) - Sprint Nextel Corp’s proposed $483 million merger with Virgin Mobile USA Inc received antitrust clearance, the U.S. Federal Trade Commission said on Monday.
In July, Sprint said it planned to buy out small wireless carrier Virgin Mobile in a deal that pushes Sprint, the No. 3 U.S. mobile service provider, deeper into the low-end prepaid mobile market.
While Sprint already rents space on its network to Virgin Mobile, some analysts were puzzled by its decision to buy the small carrier. Sprint already has its own prepaid unit, Boost, which offers consumers unlimited calls for a set monthly fee.
The deal will make Sprint more exposed to the toughest part of the prepaid market, in which customers pay in advance for calls on a per minute basis.
Analysts said the deal could be an indication that Sprint was having a difficult time turning around its main postpaid business, which serves high-value customers who pay monthly bills. Sprint is set to report quarterly results on Wednesday.
Boost, Leap Wireless and MetroPCS Communications Inc have seen strong growth in prepaid services that offer unlimited calls for a monthly fee.
Sprint, which has been struggling to stem customer defections from its own mobile service over the last few years, said the deal would increase its free cash flow but did not give a specific forecast for the impact of the transaction.
A Stifel Nicolaus analyst report said on Monday that a small number of Virgin Mobile’s international licenses that would need to be transferred to Sprint will have to be reviewed by the Federal Communications Commission.
“Its review will take some time, but we doubt it will pose a serious obstacle,” the Stifel Nicolaus report said.
Reporting by John Poirier; Editing by Leslie Gevirtz and Steve Orlofsky