Sprint paying more for Virgin Mobile subscribers

Times have not been good for Sprint. The nation’s No. 3 wireless carrier has been losing subscribers all year, and it’s unknown if that will change during this fourth quarter. If they do lose another million or so, though, it won’t be for lack of effort on their part. They scored well on their second straight customer service survey, which means they’re improving on their biggest weakness. They’re also offering more incentives to MVNO Virgin Mobile. They’ll pay out a bonus for customers added in the fourth quarter of 2008.

The MVNO model is a strange one. First, Virgin pays Sprint for network usage. This will total $320 million this year, $370 million next year, and $420 million in 2010. But Virgin can earn back some of that money with network credits. Sprint agreed to pay the MVNO $2.50 for each subscriber they added between July 1, 2008 and December 31, 2009. That total could reach a maximum of $10 million.

That deal was amended this week, with Sprint paying an additional $2 for each customer added in the fourth quarter. It appears that the $10 million cap could be lifted, too. The required payment for 2008 will also drop to $318 million.

Sprint Connection makes a rough calculation of the value of a Virgin customer to Sprint:

This is a rough calculation, to be sure, but it takes about 11 Virgin customers to equal one of Sprint’s calling contract subscribers paying, on average, $56 a month.

If Virgin pays Sprint $318 million and has about 5 million subscribers, that translates to about $5 per month per Virgin customer for Sprint – before Sprint pays any “network usage credit” bounties for new customers.

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