The cellular phone services arm of Sprint has formed a joint venture with the wireless branch of the Virgin Group entertainment family to market cell phones to the U.S. youth market, the two companies announced Friday.
The Virgin Mobile USA venture will use Sprint's PCS cellular infrastructure to provide nationwide long-distance coverage, while the phones will carry the Virgin brand, according to the release. The venture targets 15- to 30-year-old consumers, offering pay-as-you-go access.
Younger mobile phone users have sufficient cash to buy phones, but often lack the credit history to establish an account, said Tom Mateer, Sprint's vice president of affiliation and private-label services. Prepaid phone service like disposable phone calling cards offer an alternative based in cash instead of credit transactions, he said.
"Cash-based programs have been around for a while in the U.S., but they're more popular in Europe," he said. "We have established a more credit-based economy. If you don't have good credit, then the ability to get a hold of wireless service is difficult."
Corporate mobile services users tend not to have similar credit crunches, and so are less likely to adopt a pay-as-you-go plan, he said.
Sprint will initially contribute US$50 million in services, while Virgin invests $50 million in cash to the venture. Sprint and Virgin will share equal control over the venture. The board of directors includes executives from both companies, including Sprint PCS President Charles Levine and Virgin's Chairman Sir Richard Branson.
Virgin is the fifth-largest mobile phone service provider in Britain, and has been looking for an entry point into the U.S. market for some time. Virgin confirmed in June that it was talking with Sprint about a joint venture.