Virgin Mobile USA (NYSE: VM), which is in prelim talks to be bought by SK Telecom (NYSE: SKM) (Helio’s parent), as we reported first here, has filed its quarterly report with SEC, and some interesting details on its amended contract with SprintNextel, the network on which it runs the service, and one of its joint shareholders with Virgin Group.
This explains it: “The PCS Services Agreement was amended in March and May 2008. The March amendment provides that, among other things, we would not be subject to the true-up process with respect to the year ended December 31, 2007, and to amend the true-up procedures for the year ending December 31, 2008. Were we required to pay Sprint (NYSE: S) Nextel based on their actual costs, the obligation could have a material adverse impact on our liquidity. The May amendment provides that we will spend at least $298 million, including voice, messaging and data traffic, during the year ending December 31, 2008, according to a monthly payment schedule. If the amounts due based on actual usage exceed the spending commitment, we will pay the total annual amount for such actual usage owed to Sprint Nextel. This amendment is contingent upon us obtaining approval from the Virgin Group to increase the lending commitment under the subordinated credit agreement from $75 million to $100 million by June 30, 2008. If we are unable to obtain such an increase in the commitment level of the subordinated credit agreement, the May 2008 amendment to the PCS Services Agreement will terminate and the higher pricing provisions otherwise applicable under the PCS Services Agreement will be in effect. If we are unable to increase our borrowing capacity under the subordinated credit agreement and are required to pay higher network rates, it could have a material adverse effect on our results of operations, cash flows and financial position.”
All in all, still a tenuous position for the company to be in.
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