Virgin Mobile USA narrowed its losses on a reversal of customer defections as cash-conscious consumers sought out the discount carrier’s prepaid plans.
The company reversed two sequential quarters of customer losses, adding 216,005 customers in the fourth quarter. The additions brought the carrier’s customer base to 5.4 million, partially reflecting Virgin’s acquisition of Helio, which closed in August.
Results were buoyed by the popularity of Virgin’s higher-value “hybrid” plans, which accounted for nearly half of the company’s fourth-quarter gross additions. The contract-free plans offer consumers a set number of minutes without a contract, falling somewhere in between prepaid plans and higher-end plans requiring a contract.
Quarterly ARPU rose for the second sequential quarter, rising 4 percent to $21.14 from last year and 3 percent from the third quarter. For the full year, however, ARPU fell to $20.30 from $21.24 last year. Virgin posted a 30 basis point improvement in its churn rate, which fell to 4.8 percent compared with 5.1 percent last year.
Fourth-quarter net losses narrowed to $4.4 million, or 12 cents per diluted share, compared with last year’s loss of $14.7 million, or 28 cents per share. Excluding charges including outsourcing, workforce reduction and $5.4 million related to its Helio acquisition, the company lost 5 cents per share.
Revenue rose about 5 percent, to $347 million, helped along by a 10 percent increase in service revenues, which comprise the bulk of the company’s sales.
For the full year, the company posted a healthy 88 percent rise in net income, which came in at $7.94 million, or 13 cents per share, compared with last year’s figure of $4.22 million, or 8 cents per share.
Revenue fell slightly, to $1.32 billion.
For the first quarter of 2009, Virgin expects adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) to be $30 million to $35 million. The company said the timing of certain handset payments and other costs following the holiday season will affect free cash flow, which is expected to break even or fall to a loss of $10 million.
For the full year, the company posted EBITDA guidance of $110 million to $125 million, with free cash flow coming in at $35 million to $45 million.