Virgin Mobile USA,
the MVNO pioneer which is seeing a flatline-to-decreasing growth in its business, is starting a new service inspired in part by others: the service, called SugarMama, lets people earn one minute of talking time by watching 30-second commercials on a computer or receiving SMS on their phones, then answering questions to prove they were, in fact, paying attention. The subscribers can earn a maximum of 75 minutes per month, by watching these ads from the likes of Pepsi, Microsoft’s Xbox game console and a youth antismoking campaign called Truth.
A good counter-point from Roger Entner, an analyst with Ovum Research: the kinds of consumers willing to swap their time for airtime were not likely to be big spenders. “If you’re too cheap to buy a minute of air time, how are you going to afford an Xbox?” Entner said. The people likely to earn minutes for free “are people who want to avoid costs at any cost.”
VMUSA is 49 percent owned by Sprint Nextel, and it runs on Sprint’s network. The service has been in losses from the start and Sprint has fulfilled its obligation to fund the joint venture. From Sprint’s annual report for last year, “Since Virgin Mobile USA’s inception, we have contributed approximately $180 million to the venture in the form of cash and discounted network services, thereby satisfying 100% of our original commitments. In 2004, we advanced $10 million to Virgin Mobile USA in the form of a loan to be repaid in 2005. An additional $10 million was advanced in the form of a loan in January 2005.”
This gets more interesting: “In July 2005, we received approximately $200 million from Virgin Mobile USA representing a loan repayment of $20 million and a return of capital of $180 million resulting in a negative investment balance of $180 million as of December 31, 2005. Virgin Mobile USA funded the distribution with proceeds from a loan.”
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