• by Mark Walsh  @markfwal, May 12, 2009

With the prepaid phone market booming, Virgin Mobile USA's loss of more than 133,000 net customers in the first quarter runs counter to current trends. Compare that to Boost Mobile, Sprint's prepaid service, which added 764,000 customers in the quarter.

 

Even so, Virgin Mobile easily beat analyst earnings expectations, partly by increasing the number of customers subscribing to higher-margin "hybrid" service plans. The company posted adjusted earnings of 24 cents a share -- more than double estimates of 10 cents, on net income of $19.1 million.

Revenue increased 2% to $337 million. Virgin Mobile highlighted the success of its hybrid plans, which combine elements of prepaid and postpaid service by offering a set number of minutes at a fixed price without a contract.

Hybrid plans, which CEO Dan Schulman said bring in higher average revenue per user (ARPU), made up 55% of gross customer additions in the first quarter. Overall, ARPU was flat at about $20 because of the trend of consumers replacing voice minutes with messaging.

The company expects that figure to increase in the second half of the year after cutting its unlimited plan from $80 to $50 in April and the launch of its Pink Slip Program, which promises to pay three months of service for users who lose their jobs.

Virgin Mobile, long a leading player in prepaid cell service, made those moves in response to heightened competition from the likes of Boost Mobile, which introduced a $50 unlimited calling and data plan in January. Along with Boost, regional prepaid services such as Leap Wireless and Metro PCS also reported big subscriber gains in the first quarter as consumers flock to lower-cost cell plans to save money.

As the only one of six major prepaid carriers to lose customers in the quarter, according to The Wall Street Journal, Virgin Mobile is clearly feeling the pressure of a more crowded market.

Still, the impact of Virgin's $50 unlimited plan will not be seen until the next quarter's results. Schulman, however, said initial results show the percentage of customers signing up for unlimited plans has grown five times.