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Aug. 11, 2009

Even with a recent loss of almost of 270,000 customers in the last two quarters, Virgin Mobile’s profits still increased to $17.2 million in its second quarter.

This is in sharp contrast to its much lower earnings of just $3.5 million for the corresponding 2008 period.

“Prepaid wireless services are here to stay. I don't think it’s just the economic environment that is driving the increase,” Virgin Mobile's CEO Peter Schulman said in a conference call with wireless analysts.

He added “I think instead the economic environment actually helped to make people aware that prepaid was not just for people who couldn’t move to postpaid.”

Schulman points to the popularity of the company’s so-called hybrid plans, which are essentially postpaid plans without a contract.

“Hybrid prepaid service plans are probably the fastest growing segment of the mobile industry right now and I see no reason for the foreseeable future that that should slow down,” he said.

As a percentage of total gross customer additions, Virgin Mobile’s hybrid plans grew from 55 percent in the first quarter to 63 percent in the second quarter. According to the company, hybrid customers have more than fifteen times the lifetime value of its average pay-by-the-minute customers.

However, ARPU (average revenue per user) dropped to $18.98 from $19.49 in 2008 as the company lowered prices to better compete with other discount wireless carriers such as MetroPCS and Leap International.

Virgin’s churn rate also improved, falling to 5.3 percent from 5.6 percent in 2008.

For its part, Sprint Nextel is banking on the success of prepaid services as well. In July, Sprint said it would acquire Virgin Mobile in a deal that values the mobile carrier at about $483 million.

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    This article was featured on Business 5.0 and on Tech Blog.

Source: Virgin Mobile.