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Boost Sees Benefit in Softbank-Sprint Deal

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Irvine-based Boost Mobile LLC is expected to get a financial boost from Softbank Mobile Corp.’s $20.1 billion deal to take a majority stake in Boost parent Sprint Nextel Corp.

Sprint received a $3.1 billion cash infusion last week from the Japanese company, which is set to acquire 70% of the Overland Park, Kansas-based wireless carrier as its seeks to improve its competitive stance against Verizon Communications, T-Mobile USA Inc., and AT&T Inc.

The investment will be used to shore up the balance sheet for Sprint and subsidiaries including Boost.

“It’s going to make Sprint a stronger and more robust competitor in the U.S. by enhancing our financial position,” Boost Mobile Vice President Andre Smith said.

Boost is a no-contract, prepaid carrier, and will be tested as the industry undergoes a new round of consolidation.

Dallas-based rival MetroPCS Communications Inc. is set to combine operations with T-Mobile USA Inc. of Bellevue, Wash., in a reverse merger that will pay MetroPCS shareholders $1.5 billion and yield 42.5 million subscribers. Others deal have been rumored as well.

The prepaid segment accounts for about 25% of the wireless market, according to industry sources.

Boost, established 10 years ago, is one of three Sprint-owned no-contract, prepaid carriers. The brand targets lower-income consumers, typically in urban markets, with unlimited texting and stable monthly rates.

The Softbank buy also should bring Sprint added technology, improve its purchasing power with mobile phone and network equipment makers, and position the company for longer growth targets.

Sprint executives are now more focused on “longer-term goals of increasing market share and becoming a solid player in the U.S. wireless industry,” JPMorgan Chase & Co. analyst Philip Cusick wrote in an investor note after meeting with Sprint Chief Executive Dan Hesse and Softbank Chairman and Chief Executive Masayoshi Son.


Boost Mobile operates in one of the most competitive telecom segments. No-contract customers are free to leave carriers and choose other providers at any point without penalty. The company employs about 140 in Irvine and has 274 retail stores across the county.

Sprint doesn’t break down revenue per brand. The company last week reported its prepaid brands—which also include Virgin Mobile USA and Assurance Wireless in addition to Boost—topped $1.12 billion in revenue in the September quarter, 28% more than a year earlier.

That amounted to about 13% of Sprint’s $8.76 billion in sales in the recently ended quarter.

No-contract customers paid a monthly average of $26.18 for service in the third quarter.

Boost Mobile has improved retention rates among its customer base in the last year, according to Smith.

The company saw a 50% increase in customers staying 12 months or longer, while cutting annual departures by more than a million. A product push and service tweaks drove a nearly $5 jump in average revenue per user over the past two years.

Boost Mobile moved into its new 32,000-square-foot headquarters in March. The five-year lease saved the company “millions,” while streamlining operations to one floor. The prior headquarters spanned two adjacent buildings with two floors.

Competition is expected to heat up with T-Mobile’s pending buy of Metro PCS, according to Peter Rhamey, an analyst in the Toronto office of New York-based BMO Capital Markets.

“A deal would remove a competitor in the crowded U.S. wireless market, especially in the prepaid segment, which would be beneficial for both companies who heavily focus on urban centers,” Rhamey said.

The deal is set to boost T-Mobile’s no-contract business to 45% of its subscription base, up from 29% now.

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