Source: Virgin Picks Sprint for U.S. Move
By Richard Baum, UK telecoms correspondent
LONDON Sunday June 10 8:29 AM ET (Reuters) - Richard Branson's Virgin Group has chosen U.S. telecoms operator Sprint Corp (NYSE:FON - news) as its partner for a $1 billion assault on the North American mobile market, an industry source said on Sunday.
Sprint beat out rivals including AT&T Corp (NYSE:T - news) to supply the network for a Virgin-branded service based on Branson's mobile companies in the UK and Australia.
The airline entrepreneur believes he can leverage his brand name to break into the relatively immature U.S. market, where only 40 percent of people have mobiles compared with up to 70 percent in Europe.
Branson has signed up more than 865,000 customers in the UK through a joint venture with Deutsche Telekom AG's (DTEGn.DE) One 2 One, targeting the youth market that shops in Virgin record stores and drinks Virgin Cola.
But Virgin has found in the past that its brand does not necessarily buy it success in the United States. It had a hard time launching Virgin Cola there, and will be competing with six major nationwide mobile telecoms brands.
The 50/50 mobile venture hopes to stand out from the crowd by teaming up with U.S. consumer electronics retailer Best Buy Co (NYSE:BBY - news), the source said. Best Buy will sell the service, drawing on the experience of Virgin's V-Shops in the UK, which sell mobile phones alongside CDs and videos.
A Virgin spokesman refused to confirm the deal.
``We're progressing with talks in the U.S. and we expect to be able to announce a deal soon,'' he said.
Branson is investing an initial 10 million pounds ($13.82 million) in the U.S. venture, the source said, which could eventually cost the partners $1 billion. The money was raised from a loan secured against Branson's 51 percent stake in Virgin Atlantic Airways VA.UL.
Branson has a revolving credit facility secured against the financial assets of Virgin Atlantic that he regularly draws on, the spokesman said, playing down an Observer report that he mortgaged the stake last month. Branson sold the remainder of the airline to Singapore Airlines Ltd. (SIAL.SI) last year.
Virgin Mobile began in the UK and expanded into Australia, where its partner is C&W Optus (CWO.AX). It has also moved into Asia with Singapore Telecommunications Ltd. (TELE.SI), which is in the process of buying the mobile arm of Optus.
``There's a lot of enthusiasm from the (U.S.) companies to use Virgin as a consumer brand,'' Branson said in a recent interview with Reuters Television. ``We're bringing a brand that is hopefully one of the better respected in the world.''
The UK venture will be profitable when it reaches 1.5 million customers, Branson said.
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