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Article by DailyStocks_admin    (09-22-08 07:12 AM)

Filed with the SEC from Sep 11 to Sep 17:

Virgin Mobile USA (VM)
As of Aug. 22, British billionaire Sir Richard Branson held about 52 million shares (a 63.1% stake), according to a Sept. 12 filing.

BUSINESS OVERVIEW

Overview

We are a leading national provider of wireless communications services, offering prepaid, or pay-as-you-go, services targeted at the youth market. Our customers are attracted to our products and services because of our flexible monthly terms, easy to understand pricing structures, stylish handsets offered at affordable prices and relevant mobile data and entertainment content. Approximately half of our current customers are ages 35 and over. We offer our products and services on a flat per-minute basis and on a monthly basis for specified quantities, or buckets, of minutes purchased in advance—in each case without requiring our customers to enter into long-term contracts or commitments.

As of December 31, 2007, we served approximately 5.1 million customers, which represented an 11.2% increase over the 4.57 million customers we served as of December 31, 2006. As of September 30, 2007, the most recent date for which industry-wide data is available, we estimate that we accounted for 13.7% of the pay-as-you-go market in the United States. Our revenues and net income for the year ended December 31, 2007 were approximately $1.3 billion and $4.2 million, respectively. Historically, we have grown our business organically, but we may consider mergers, acquisitions and strategic investments from time to time that we expect to enable us to achieve greater scale, cost or technology advantages.

We market our products and services under the “Virgin Mobile” brand, which enjoys strong brand awareness and in 2004 was rated as one of the top “trendsetting” brands in any sector by the Cassandra Report, which tracks youth trends in the United States. We have exclusive rights to use the Virgin Mobile brand for mobile voice and data services through 2027 in the United States, Puerto Rico and the U.S. Virgin Islands through our trademark license agreement with the Virgin Group.

We provide our services using the nationwide Sprint PCS network. We purchase wireless network services at a price based on Sprint Nextel’s cost of providing these services plus a specified margin under an agreement which runs through 2027. As a result, we are able to dedicate our resources to acquiring and servicing customers rather than to acquiring spectrum or building and maintaining a wireless network. We control our customers’ experience and all customer “touch points,” including brand image, pricing, mobile content, marketing, distribution and customer care.

We were founded as a joint venture between Sprint Nextel and the Virgin Group and launched our service nationally in July 2002, reaching one million customers in November 2003, within eighteen months of our national launch. In October 2007, we completed our initial public offering and a related reorganization. Following the reorganization, Virgin Mobile USA, LLC converted into a Delaware limited partnership and changed its name to Virgin Mobile USA, L.P. (the “Operating Partnership”) and became the indirect, majority-owned subsidiary of Virgin Mobile USA, Inc., a holding company which holds, directly and indirectly through Bluebottle USA Investments L.P. (“Bluebottle Investments”) and Bluebottle USA Holdings L.P. (“Bluebottle Holdings”), partnership units in the Operating Partnership and all of the outstanding limited liability company interests of VMU GP, LLC, the general partner of Bluebottle Investments. As an indirect owner of VMU GP1, LLC, the sole general partner of the Operating Partnership, Virgin Mobile USA, Inc. operates and controls all of the business and affairs of the Operating Partnership. Virgin Mobile USA, Inc., directly and through its subsidiaries, and Sprint Nextel are the only partners of the Operating Partnership. Virgin Mobile USA, Inc. consolidates the financial results of the Operating Partnership, and the ownership interest of Sprint Nextel in the Operating Partnership is treated as a minority interest in our consolidated financial statements.

Business Model

As a mobile virtual network operator, or MVNO, we do not own or operate a physical network, which frees us from related capital expenditures and allows us to focus our resources on content and customer service. We control all aspects of our customer relationship, including image, pricing, content, advertising and marketing, distribution, customer care and the information technology platform. This structure allows us to dedicate the majority of our resources to acquiring and servicing customers rather than acquiring spectrum or building and maintaining a capital intensive wireless network. As a result, in the year ended December 31, 2007, we expended approximately 2.2% of our revenues on capital expenditures (mostly to support information technology and customer support infrastructure). Moreover, the simple, grab-and-go packaging of our handsets enables efficient distribution in third-party stores, saving us the expense of owning and operating our own retail stores.

Competitive Strengths

We believe that the following key strengths enable us to compete effectively in the wireless communications market:

Differentiated Market Approach. We have been pioneers in the U.S. wireless industry, offering innovative, youth-oriented pay-as-you-go plans without long-term contracts or commitments. Our service plans, which include both flat per-minute rates and hybrid plans with monthly buckets of minutes purchased in advance, are attractive alternatives to traditional postpaid plans. Our stylish and affordable handsets and our voice and data service offerings, including VirginXL and VirginXtras (mobile entertainment applications which include ringtones, text, instant and picture messaging, email, games, graphics, internet search and information content), are designed to make Virgin Mobile particularly appealing to the youth market. We believe that the relevance and appeal of our non-voice services is evidenced by the fact that approximately 16.4% of our net service revenues for the year ended December 31, 2007 were from non-voice services. These services provide an additional source of revenue and we believe provide us with improved customer retention.

Strong Brand. Virgin Mobile is the number one brand for prepaid wireless services in the United States in awareness and purchase consideration among 14-34 year-olds, according to Gallagher Lee Brand Tracking (fourth quarter 2006), and was rated as one of the top ten “trendsetting” brands in any sector in the United States by the Cassandra Report in 2004. We benefit from our brand association with the Virgin Group, a globally recognized consumer organization with interests ranging from transportation to leisure and entertainment. We believe that our customers identify with brands and products that reflect their values and our marketing efforts focus on leveraging the popular attributes of the Virgin brand: fun, style, good value and social responsibility. We believe that this strong brand association is one of our most distinct and powerful competitive advantages and is difficult for our competitors to replicate. We have exclusive rights to use the Virgin Mobile brand through 2027 for mobile voice and data services in the United States, U.S. Virgin Islands and Puerto Rico through our trademark license agreement with the Virgin Group.

Extensive and Efficient Distribution. Our nationwide distribution network is comprised of approximately 140,000 third-party retail stores that offer account replenishment, or Top-Up cards, including more than 40,000 retail locations that also sell our handsets. We distribute our products through leading national retailers, including Wal-Mart, Best Buy, RadioShack and Target, and generally receive favorable product positioning in their retail locations. Our products are designed to require minimal sales assistance, which enables us to distribute them cost-effectively through third-party channels and eliminates the need to expend capital to build and operate our own retail stores.

Award-winning Customer Service. Our award-winning customer service program, Virgin Mobile At Your Service, provides user-friendly and effective customer service through our call centers and our website. Our high quality of customer service helps us to retain customers. As a result, we believe that our churn is among the lowest in the prepaid segment of the wireless communications industry. Our low churn is also a direct result of customer retention programs. We consistently receive high ratings in customer satisfaction surveys. In both 2006 and 2007, we were the sole recipient of the J.D. Power and Associates Award for Wireless Prepaid Customer Satisfaction and our customer satisfaction consistently exceeds 90%, according to Market Strategies, Inc., which we have engaged to survey our performance since 2003.

Capital Efficient Business . Our MVNO business model, easy-to-understand products and services, cost-efficient distribution channels and focused marketing strategy have made us one of the lowest cost operators in the wireless communications industry. As an MVNO, we have substantially lower capital expenditures than those of wireless communications providers that own their networks. While we expect to continue to subsidize handsets in order to acquire additional customers, we do not operate our own retail stores, which saves us substantial sales and distribution costs. In addition, we pay Sprint Nextel for wireless services only to the extent of our customers’ usage. As a result, we have a highly variable cost structure, which we believe has allowed us to reach profitability faster than if we were to maintain our own network.

Our strategy allows us to tailor services and direct resources at our target segment and not to the broader wireless communications market targeted by many other U.S. wireless communications providers. As a result, we are able to compete effectively in this target market against larger wireless communications providers.

Proven and Committed Management Team . We are led by a highly experienced management team, which has significant expertise in the telecommunications, internet and e-commerce, media and entertainment, consumer products and retail industries. Many members of our management team joined us prior to our national launch and have been instrumental in developing and implementing our business model.

Business Strategy

We believe the following components of our business strategy will allow us to continue our growth and improve our profitability:

Focus on Fast-growing Segments of U.S. Wireless Market . We focus on two fast-growing segments of the U.S. wireless communications market: youth and pay-as-you-go. We believe there is substantial demand in the United States for our straightforward, value-oriented wireless communication services. According to the Yankee Group, the number of users of wireless service in the under 35 year-old segment in the United States was projected to increase by 16 million from 2006 to 2008, representing approximately 42% of the total growth in U.S. wireless customers over the same period. According to the Yankee Group, as of September 30, 2007, there were approximately 34.5 million pay-as-you-go wireless customers in the United States, with the U.S. prepaid and hybrid market representing 14.4% of total wireless customers. That number is expected to grow to approximately 53.0 million by 2011, representing a 12.4% compound annual growth rate over the same period, according to the Yankee Group. By comparison, the mobile penetration rates in western European markets range from 80% to 120%, according to Current Analysis. By 2008, the U.S. market is expected to add 37 million new customers, of which 13 million, or 35%, are expected to be pay-as-you-go and hybrid customers, according to the Yankee Group. We plan to continue to penetrate the youth segment and grow our market share by continuing to tailor our products, services and advertising message to this market, leveraging our brand through new and existing distribution channels and utilizing select youth-oriented media channels that specifically resonate with our target market.

Continue Product and Service Innovation. We have a proven ability to innovate and adapt to our customers’ needs. In 2006, for example, we launched a service plan enabling our customers to buy monthly buckets of messages in advance, as well as a new flat-rate per-minute voice plan. In addition, we launched mobile social networking and Sugar Mama, an innovative program that enables our customers to earn minutes by viewing and rating advertisements online. In February 2008, we launched a suite of new service plans designed to broadly appeal to higher-usage, higher-revenue customers. Our monthly hybrid plans, which range from $20 a month to $99.99 a month, include anytime and night and weekend minutes without long-term contracts or commitments—effectively expanding the pay-as-you-go market to include some customers who previously might have selected a postpaid service. We intend to continue our efforts to address our market’s evolving needs and to offer innovative and popular products and services ahead of our competitors.

Enhance our Brand Strength. We aim to maintain and strengthen a vibrant brand image that resonates with our customers and distinguishes us from other wireless communications providers. Our goal is to attract and retain customers through our youth-oriented marketing message and service offerings that are straightforward, flexible and a good value. For example, our marketing events in 2007 included the Virgin Festival organized by Virgin Mobile, a two-day event that drew approximately 72,000 fans to see major performing artists. In 2008, the event will be called the Virgin Mobile Festival, increasing brand awareness for the brand and our products and services. We will continue to leverage our brand through our website, targeted marketing, advertising, product packaging, point-of-sale materials and innovative services.

Leverage our Scale and Infrastructure to Drive Profitable Growth . As of December 31, 2007, we had grown our customer base to approximately 5.1 million. We have built the infrastructure to support future growth in customers and usage while leveraging the advantages of our predominantly variable cost structure. As we continue to scale the business, we expect our growing customer base to translate into improved cost economies without the need for substantial capital investment.

Customer Acquisition

Our customer acquisition approach is based on the acquisition cost and expected value of each customer. Our promotional offers are typically consumer driven, linking the purchase of our airtime with the purchase of our handsets and other products and services.

We have identified a number of customer acquisition principles that we believe contribute to our success, including:


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Marketplace segmentation that allows us to connect effectively with the best prospects through targeted use of media and an array of marketing vehicles;


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Compelling, focused marketing messages aimed at our best prospects;


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Simple value proposition and service that is easy to articulate, understand, evaluate, buy and use;


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Good value and fair pricing;


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Innovative and exciting design in our products, packaging and point-of-sale presentation;


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Easy and efficient account activation and maintenance through our website and other self-service tools and customer service;


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Extensive distribution network of approximately 140,000 third-party retail stores that offer account replenishment, or Top-Up cards, including more than 40,000 retail locations that also sell our handsets, including the following partners: 7-11, Amazon.com, Best Buy, K-Mart, Radio Shack, Rite Aid, Safeway, Sprint Nextel Stores, Target Stores, Virgin Megastores, Walgreens and Wal-Mart; and


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Friendly and efficient customer care resulting in high customer satisfaction.

The wireless business in the United States generally, and the prepaid business in particular, is seasonal and is often disproportionately dependent on fourth quarter results. Our business has experienced a similar pattern and we expect this pattern to continue in the future. We rely heavily and concentrate our marketing efforts on key promotional periods, including Valentine’s Day, back to school, school graduation and the December holiday season.

Products and Services

We offer a range of products and services that are designed to meet the lifestyles of our target market.

Voice Services . We offer high-quality wireless services using the nationwide Sprint PCS network. In addition to voice services, our services include additional calling features such as voicemail, caller identification, directory assistance and international calling.

Data Services . Our target customers are early adopters of new technologies and use mobile data services at rates higher than those of the average wireless customer. In 2006, non-voice services represented 17% of our revenue, approximately 5 percentage points higher than the wireless industry average of 12%, according to the Yankee Group. In 2007, non-voice services represented 16.4% of our revenue. We develop content and have entered into relationships with third parties to procure and offer customized content, music and other services, including:


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Messaging (text or short message services, or SMS; multimedia services, such as picture messaging, instant messaging, or IM and email). We have partnered with Yahoo and AOL to provide our customers with mobile email and instant messaging.

•

Music (ringtones, text tones, alerts, artist profiles and communities).


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Web browsing and search.


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Downloadable games, customized wallpaper, screensavers and pictures.

Handsets . We offer stylish handsets at affordable prices. We currently offer eleven handset models and plan to introduce five new handsets in 2008. Our handsets are affordably priced, with prices currently ranging from $9.99 to $99.99, and we make offers from time to time on our website and through our retail partners for free handsets when customers purchase specified amounts of airtime. We currently purchase our handsets from Kyocera Wireless Corp., LG Electronics MobileComm U.S.A., Inc. and UTStarcom Personal Communications LLC. In the past, we have purchased handsets from Nokia Inc. and we are negotiating to purchase handsets from other manufacturers. Although we attempt to maintain multiple vendors to the extent practicable, our handset inventory is currently acquired from only a few sources. We believe that our relationships with our suppliers are strong.

Our handsets are distributed through a simple package that can be picked up by a customer with no sales assistance. Each handset package includes everything a customer needs to get started, including the handset, charger, initial credit for usage, promotional items and information that welcomes new customers to our service. Activation typically takes less than five minutes on our website or through our customer service group, Virgin Mobile At Your Service. Each handset package also includes a postage-paid return envelope to recycle the customer’s old handset, regardless of the brand of the recycled phone. Our handsets are intended only for use with our wireless services.

Virgin Mobile Sugar Mama. Our Sugar Mama program is a service enhancement and mobile media platform that allows our customers to earn up to 75 minutes in airtime per month by viewing advertisements from several business partners. We have partnered with companies such as American Legacy Foundation, Levi Strauss, Showtime Networks, U.S. Navy, Sony Pictures, Sony Music Entertainment, Unilever and Microsoft’s Xbox. Internet access is required to establish and manage a Sugar Mama account. Customers generally must view an advertisement, rate it and answer a survey to receive airtime awards. As of December 31, 2007, our Sugar Mama program had approximately 600,000 registered customers.

Content Related Quality Control . We have implemented policies to ensure the safety of our content and to safeguard against objectionable material. Our customers are prohibited from using our services for any illegal purpose. They are further prohibited from publishing, copying or reproducing (i) objectionable content or content that is offensive to third parties; (ii) content that may infringe upon the patent, trademark or other intellectual property of others; (iii) content used for purposes of solicitation of other customers or any other commercial purpose; or (iv) content that could be harmful to other customers, such as content containing electronic viruses or “worms.” We reserve the right to remove any content that we, in our sole discretion, deem to be objectionable and to suspend or terminate the services of those we find to be in violation of our policies.

Pricing and Payment

Our prepaid, or pay-as-you-go, wireless service is intended to be straightforward and easy to use. In contrast to traditional postpaid wireless communications providers, we do not require our customers to enter into long-term contracts with us. We offer our products and services on a flat per-minute basis and on a monthly basis for specified quantities, or buckets, of minutes purchased in advance—in each case without requiring our customers to enter into long-term contracts or commitments.

Minute-based plans . We currently offer two plans launched in late February 2008 under which our customers can pay by the minute. The first offers airtime costing $0.20 per minute, with the ability for customers to purchase optional add-on packages of minutes, or “Minute Packs,” costing $20, $30 and $50 per month for 30-day bundles of 200, 400 and 1,000 “anytime” minutes, respectively. If a customer purchases another Minute Pack within 30 days of the customer’s last Minute Pack purchase, the customer may roll forward up to 5,000 unused Minute Pack minutes for an additional 30 days. The second offers airtime costing $0.10 per minute for a $6.99 monthly fee. Neither of our pay-as-you-go plans feature separate night and weekend rates. Until late May 2008, customers will also be able select from two additional minute-based plans, the first of which offers airtime costing $0.18 per minute, and the second of which offers airtime costing $0.10 per minute for calls to and from any other Virgin Mobile USA phone number and $0.20 per minute for other domestic calls.

Monthly plans . We currently offer several plans launched in late February 2008 under which our customers can purchase airtime in advance on a monthly basis. These plans range from $24.99 per month for 200 “anytime” minutes and 500 separate night and weekend minutes to $99.99 per month for 1,000 “anytime” minutes, unlimited night and weekend minutes and unlimited calls to and from any other Virgin Mobile USA phone numbers. These monthly plans require use of a registered debit, credit or PayPal account. Until late May 2008, customers will also be able to select from six additional monthly plans. These plans, which range from $14.99 per month for 100 “anytime” minutes and no night and weekend minutes to $99.99 per month for 1,000 “anytime” minutes, unlimited night and weekend minutes and unlimited calls to and from any other Virgin Mobile USA phone numbers, do not require a registered debit, credit or PayPal account.

Messaging . We currently offer several plans under which customers can pay for messaging services either on a monthly basis or per message basis. Customers using plans other than monthly plans which require a registered payment method may choose from one of the following basic monthly pricing plans for domestic email, text, picture and instant messaging: (1) $2.00 per month for 30 messages; (2) $5.00 per month for 200 messages; (3) $10.00 per month for 1,000 messages; and (4) $20.00 per month for an unlimited number of email, text, picture and instant messages. Customers using monthly plans which require a registered payment method may choose from one of the following basic monthly pricing plans for domestic email, text, picture and instant messaging: (1) $5.00 per month for 1,000 messages; and (2) $10.00 per month for an unlimited number of email, text, picture and instant messages. Customers may also choose to pay by the message, for $0.10 per email, text and instant message and $0.25 per picture message.

International . We provide international voice service that allows our customers to make and receive calls to and from over 220 countries worldwide. Customers making international calls are charged an international per-minute rate for each respective country in addition to the standard airtime rate of the respective customer’s applicable plan. In addition, we offer international text messaging services priced on a per message basis. International text messages are $0.20 to send and $0.10 to receive.

Feature Pricing . Additional features fall into three general categories: (i) ringtones and other mobile content; and (ii) downloads, including games and graphics; and (iii) mobile web browsing. All additional features are priced individually or offered on a daily or monthly subscription basis. Certain features require payment of a daily or monthly access fees.

Top-Up Cards and Payment Methods . Our customers may use Top-Up cards—available in increments of $10, $20, $30, $50, and $90 to add money to their accounts. Our Top-Up cards are currently offered at approximately 140,000 third-party retail locations throughout our coverage area. Customers may use Top-Up cards to add cash to their account balances for our prepaid minute based plans, recurring charges for certain of our monthly plans, text and picture messaging and mobile content. For those plans that do not require a registered payment method, customers may also elect to register a credit card, debit card or PayPal account to credit their accounts automatically on a monthly basis or when their accounts reach a specified minimum amount.

Legacy Pricing Offers. In addition to the pricing plans for our products and services described above, approximately 1.3 million of our customers use wireless services under our previous pricing plans, including our pay-as-you-go and hybrid monthly plans that predated the new offers launched in February 2008, and our other “Minute2Minute” and “Day2Day” plans. Customers using our “Minute2Minute” plan are charged $0.25 per minute for each of the first 10 minutes of each day, and $0.10 for every minute thereafter. Customers electing our “Day2Day” plan are charged $0.35 per day and pay $0.10 for each minute of use. These pricing plans are not available to new customers.

CEO BACKGROUND

Daniel H. Schulman, Chief Executive Officer and Director. Dan Schulman joined us as chief executive officer in October 2001, bringing almost two decades of experience in the telecommunications industry. He has led the company from its national launch in 2002 to its current position. Mr. Schulman has also served as the chief executive officer of Priceline.com, where he established one of the most popular and recognized brands on the internet, and was a primary architect in driving Priceline.com to profitability. Prior to joining Priceline, Mr. Schulman served more than 18 years at AT&T, rising to become the youngest member of the company’s senior executive team, the AT&T Operations Group, and president of the $22 billion core consumer long distance business. Mr. Schulman is a member of the board of directors of Symantec and the chair of its compensation committee. Mr. Schulman also serves on the board of trustees of Rutgers University. He holds a double M.B.A. in business administration and finance and international business from New York University and a bachelor’s degree from Middlebury College.

Thomas O. Ryder . Mr. Ryder has served as the Chairman of the Board of Directors since October 2007. Mr. Ryder is an investment professional. He retired as Chairman of the Board of The Reader’s Digest Association, Inc. on January 1, 2007. Prior to his retirement, Mr. Ryder served as the Chairman of the Board of Reader’s Digest Association, Inc. from January 1, 2006 and as Chairman of the Board and Chief Executive Officer from April 1998 through December 31, 2005. Mr. Ryder was President of American Express Travel Related Services International, a division of the American Express Company which provides travel, financial and network services, from October 1995 to April 1998. He is a director of Amazon.com, Inc. and Starwood Hotels and Resorts, Inc. Mr. Ryder received a Bachelor of Arts degree in journalism from Louisiana State University in 1966.

Frances Brandon-Farrow. Frances Brandon-Farrow has served on our Board of Directors since June 2007. Ms. Brandon-Farrow joined the Virgin Group in 1993. As an executive member of the board of Virgin Atlantic Airways since 1993, during the following seven years she held various operating roles and had responsibility for a broad range of functions including all aspects of the customer experience and service, human resources, government affairs and legal affairs. Prior to that, she worked in the mergers and acquisitions practice of the London law firm of Cameron McKenna. Ms. Brandon-Farrow is currently Chief Executive Officer of Virgin USA, Inc., the headquarters of the Virgin Group in North America. She has responsibility for expansion of the Virgin brand and new business development and investment management in North America. She is also a member of the board of several other Virgin companies, including Virgin Atlantic Airways, Virgin Holidays, Virgin Mobile Canada, Virgin America, Virgin Money US, Virgin Charter, Virgin Enterprises (the owner of all of the Virgin trademarks worldwide), and Virgin Unite (the Virgin Group’s charitable arm). She is a graduate of the University of Wales and the Royal College of Law in the UK.

Douglas B. Lynn. Mr. Lynn has served on our Board of Directors since August 2007. Mr. Lynn is currently Vice President of Corporate Development for Sprint Nextel, a position he has held since August 2005. Mr. Lynn joined the Sprint Corporation (predecessor to Sprint Nextel) in 1994 and has held various positions in accounting and finance, including Assistant Corporate Controller from 1997 to 2000. Prior to joining Sprint Nextel, Mr. Lynn spent six years in the savings and loan industry. Mr. Lynn began his career in public accounting and spent three years with Touche Ross and Co. in Kansas City. He received a Bachelor of Science degree in accounting from Missouri State University in 1985.

Mark Poole. Mr. Poole has served on our Board of Directors since June 2007. Mr. Poole joined the Virgin Group in 1991 as a tax consultant and was subsequently appointed Group Tax Director. After five years in this position, he was appointed the Virgin Group chief financial officer in 2000 and the Deputy Group chief executive officer in September 2005. Mr. Poole is a member of the Virgin Group Investment Advisory Committee and holds a number of non-executive directorships in the Virgin Group including Virgin Group Holdings Limited (Group holding company), Virgin Atlantic Limited (for which he chairs the Audit Committee), SN Airholdings, Virgin Retail Limited. Virgin Hotels Group Limited and Virgin Active Group Limited amongst numerous others. Mr. Poole graduated from Bristol University in 1983 with a degree in Civil Engineering (Bachelor of Science). He qualified as a Chartered Accountant (Association of Chartered Accountants) with Binder Hamlyn in London in 1989.

Robert W. Samuelson. Mr. Samuelson has served on our Board of Directors since June 2007. Mr. Samuelson joined Virgin Management Limited in July 2000 as director of Corporate Development and was subsequently promoted to executive director Telecoms and Media, overseeing Virgin’s telecoms and media interests worldwide. He was part of the team responsible for the creation of Virgin Mobile USA, LLC in 2001 and has been involved closely with the business ever since. Mr. Samuelson is a member of the Virgin Group’s Investment Advisory Committee, the body that recommends all new investments and corporate transactions for the Virgin Group. In addition to his role with Virgin Mobile USA, LLC, he also serves on the boards of Virgin Mobile Canada, Virgin Mobile France and Virgin Mobile South Africa. Prior to joining Virgin, Mr. Samuelson was a director of Arthur D Little, the management consultants, where he led the corporate finance advisory services practice. He holds an MBA from Cranfield University in the United Kingdom and a first class masters degree in natural sciences from Cambridge University.

L. Kevin Cox . Mr. Cox has served on our Board of Directors since October 2007. Mr. Cox has served as the Executive Vice President of Human Resources at the American Express Company since 2005. Prior to joining American Express, Mr. Cox held several positions at The Pepsi Bottling Group, Inc. since 1999, most recently that of Executive Vice President. From 1989 to 1999, Mr. Cox held various human resources positions at PepsiCo Inc. and its subsidiary, The Pepsi-Cola Bottling Company, playing a key role in that entity’s initial public offering. Mr. Cox received a Bachelor of Arts degree in counseling rehabilitation from Marshall University in 1985 and a Masters degree in labor and industrial relations from Michigan State University in 1987.

Kenneth T. Stevens . Mr. Stevens has served on our Board of Directors since October 2007. Mr. Stevens is the President, Chief Operating Officer and Secretary of Tween Brands, Inc., a publicly traded retailer with 785 locations in the U.S. From 2002 through 2006, Mr. Stevens worked at Limited Brands, Inc., where he held various positions, most recently that of Executive Vice President and Chief Financial Officer. Prior to working at Limited Brands, Inc., Mr. Stevens worked at several private and public companies, including Bank One Retail Group, PepsiCo, Inc. and General Mills, Inc. From 1983 to 1991, Mr. Stevens was a partner at McKinsey & Company, Inc. Mr. Stevens currently serves on the boards of Tween Brands, Inc. and Spartan Stores, Inc. He received a Bachelor of Arts degree in philosophy from the University of Redlands in 1973 and Masters of Business Administration degree from the University of Southern California in 1978.

MANAGEMENT DISCUSSION FROM LATEST 10K

Introduction

We are a holding company formed for the purpose of an initial public offering, or IPO, which was completed on October 16, 2007. In connection with our IPO, Virgin Mobile USA, Inc., Virgin Mobile USA, LLC and Bluebottle USA Investments L.P. and its subsidiaries, Bluebottle USA Holdings L.P. and VMUI Inc., completed reorganization transactions, or the Reorganization. As part of the Reorganization, Sprint Nextel (1) contributed a portion of its interest in Virgin Mobile USA, LLC to Virgin Mobile USA, Inc. in consideration for shares of Class A common stock (which were sold in the IPO) and one share of Class B common stock and (2) sold a portion of its interest in Virgin Mobile USA, LLC to Virgin Mobile USA, Inc. for $136.0 million, which consideration was based on the amount Sprint Nextel would have received had it converted such limited liability company interests into shares of the Company’s Class A common stock and sold the shares in the IPO. Minority investors in Virgin Mobile USA, LLC contributed their respective interests in Virgin Mobile USA, LLC to Virgin Mobile USA, Inc. in consideration for shares of Class A common stock (a portion of which were sold in the IPO). The minority investor in Bluebottle USA Holdings L.P. contributed its limited partnership interest to Virgin Mobile USA, Inc. in consideration for shares of Class A common stock. The Virgin Group contributed its interests in Bluebottle USA Investments L.P. and its interests in a newly-formed entity, VMU GP, LLC, to Virgin Mobile USA, Inc. in consideration for shares of Class A and Class C common stock, resulting in Virgin Mobile USA, Inc. being (directly and indirectly) the sole owner of Bluebottle USA Holdings L.P., and VMUI, Inc. was liquidated. Virgin Mobile USA, Inc. contributed a small part of its interest in Virgin Mobile USA, LLC to a newly-formed entity, VMU GP1, LLC, in exchange for all of the interests in VMU GP1, LLC. Virgin Mobile USA, Inc. then contributed all of its interests in VMU GP1, LLC to Bluebottle USA Investments L.P., which in turn contributed such interests to Bluebottle USA Holdings L.P. Virgin Mobile USA, LLC converted to a Delaware limited partnership and changed its name to Virgin Mobile USA, L.P. The limited partnership agreement of Virgin Mobile USA, L.P., provides that VMU GP1, LLC manage and control its business and affairs. VMU GP1, LLC is an indirect, wholly-owned subsidiary of the Company.

On October 16, 2007, we completed our IPO and we, along with the selling stockholders sold 27,500,000 shares of our Class A common stock. We received net proceeds of $352.7 million after deducting underwriting commissions and discounts of $23.7 million and offering expenses of $7.4 million. We used $136.0 million of the net proceeds to us to pay Sprint Nextel for a portion of Sprint Nextel’s limited liability company interests in Virgin Mobile USA, LLC that we purchased in connection with the reorganization and the IPO. The remaining net proceeds of $216.7 million were used to (1) repay $150.0 million of outstanding borrowings and $0.8 million of accrued interest under the senior secured credit facility and (2) repay $45.0 million of indebtedness and $0.6 million of accrued interest owed to Sprint Nextel under the subordinated secured revolving credit facility. Subsequent to the IPO, the remaining net proceeds of approximately $20 million were used for general corporate purposes.

We have accounted for the reorganization transactions, for all periods presented, using a carryover basis, similar to a pooling-of-interest as the reorganization transactions were premised on a non-substantive exchange in order to facilitate the IPO, resulting in the retention of historical based accounting. This is consistent with Financial Accounting Standards Board Technical Bulletin 85-5, Issues Relating to Accounting for Business Combinations, including Costs of Closing Duplicate Facilities of an Acquirer; Stock Transactions between Companies under Common Control; Down-Stream Mergers, Identical Common Shares for a Pooling of Interests; and Pooling of Interests by Mutual and Cooperative Enterprises. Under this method of accounting, we treat the companies as if they had always been combined for accounting and financial reporting purposes and, therefore, the consolidated financial statements for the years ended December 31, 2006 and 2005 are presented on the same basis as that for the year ended and as of December 31, 2007.

This Management’s Discussion and Analysis of Financial Condition and Results of Operations, or MD&A, is provided as a supplement to the financial statements and the related footnotes, included elsewhere in this annual report, to help provide an understanding of our financial condition, changes in financial condition and results of our operations. The MD&A is organized as follows:


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Company Overview. This section provides a general description of our business as well as recent developments that we believe necessary to understand our financial condition and results of operations and to anticipate future trends in our business.


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Critical Accounting Policies and Estimates. This section discusses the accounting policies and estimates that we consider to be important to our financial condition and results of operations and which require significant judgment and estimates on the part of management in their application. In addition, all of our significant accounting policies (including our critical accounting policies) are summarized in Note 2 of our audited financial statements.


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Results of Operations. This section provides an analysis of Virgin Mobile USA, Inc.’s results of operations for the years ended December 31, 2007, 2006 and 2005.


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Liquidity and Capital Resources. This section provides an analysis of our cash flows for the years ended December 31, 2007, 2006 and 2005, as well as a discussion of our financial condition and liquidity as of December 31, 2007 and 2006. The discussion of our financial condition and liquidity includes summaries of our senior secured credit facility and our subordinated secured revolving credit facility and related covenants and the borrowings outstanding thereunder as of December 31, 2007, as well as our available financial capacity under our subordinated secured revolving credit facility.


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Contractual Obligations, Commitments and Contingencies. This section provides a discussion of our commitments (both firm and contingent) as of December 31, 2007.


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New Accounting Pronouncements. This section describes new accounting requirements that could potentially impact our results of operations and financial statements.

Company Overview

We are a leading national provider of wireless communications services, offering prepaid, or pay-as-you-go, services targeted at the youth market. Our customers are attracted to our products and services because of our flexible monthly terms, easy to understand pricing structures, stylish handsets offered at affordable prices and relevant mobile data and entertainment content. Approximately half of our current customers are ages 35 and over. We offer our products and services on a flat per-minute basis and on a monthly basis for specified quantities, or buckets, of minutes purchased in advance—in each case without requiring our customers to enter into long-term contracts and commitments. Our business is highly seasonal with our first and fourth quarters reflecting higher net customer additions.

We were founded as a joint venture between Sprint Nextel and the Virgin Group and launched our service nationally in July 2002. As of December 31, 2007, we served approximately 5.09 million customers, an 11.2% increase over the 4.57 million customers we served as of December 31, 2006. Historically, we have grown our business organically, but, subject to our existing and future contractual obligations, we may consider mergers, acquisitions and strategic investments from time to time that enable us to achieve greater scale, cost or technology advantages.

We market our products and services under the “Virgin Mobile” brand, using the nationwide Sprint PCS network. We control our customers’ experience and all customer “touch points,” including brand image, pricing, mobile content, marketing, distribution and customer care, but as a mobile virtual network operator, or MVNO, we do not own or operate a physical network, which frees us from related capital expenditures. This allows us to focus our resources and compete effectively against the major national wireless providers in our target market. We purchase wireless network services at a price based on Sprint Nextel’s cost of providing these services plus a specified margin under an agreement which runs through 2027. The Sprint Nextel PCS services agreement was amended in March 2008 to provide that we will not be subject to the true-up process with respect to the year ended December 31, 2007. For the fiscal year ending December 31, 2008, we will only pay Sprint Nextel the difference between the lower of (i) the rates that Sprint Nextel provided in advance for planning purposes and (ii) the rates based on Sprint Nextel’s actual costs and the actual rates charged to us, as discussed in “Risk Factors”. Based on Sprint Nextel’s current cost of providing services, we expect the per-minute rate we pay to Sprint Nextel to decrease as our number of customers and volume of minutes we purchase from Sprint Nextel increase over time. However, if Sprint Nextel’s cost of providing services increases or our number of customers or the volume of minutes we purchase from Sprint Nextel decreases, the per-minute rate we pay to Sprint Nextel may increase. This could adversely affect financial position, our results of operations and cash flows.

In the year ended December 31, 2007, approximately 5.50% of our customers accessed our services through Sprint Nextel’s third party PCS affiliates and we generated approximately $57 million in revenues to us from such customers. Every three years, these third-party PCS affiliates have the right to discontinue the activation of service for our new customers in their respective regions, and they may next make this election in July 2008. If these third-party PCS affiliates agree to continue to support our services, they must commit to a three-year term, after which they can again elect to discontinue the activation of service for new customers in their regions. In addition, the third party PCS affiliates have the right to stop providing their services to new customers (1) if we launch services that are not pay-as-you-go services in such affiliate’s territory, (2) if we target customers outside the market segment of individuals up to and including 30 years old, (3) upon a change of control of us or Sprint Nextel, and (4) upon certain events of bankruptcy or dissolution of us or Sprint Nextel. The inability to provide service to new customers within the third party PCS affiliates’ territories could have an adverse effect on our business and could adversely affect our financial condition, results of operations and cash flows.

We operate in the highly competitive and regulated wireless communications industry. The primary bases of competition in our industry are the prices, types and quality of products and services offered. Many factors, including risk factors described in the “Risk Factors” section of this annual report, could adversely affect our results, performance and achievements.

Our management uses the following key performance metrics to evaluate our business:


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Gross additions —represents the number of new customers that activated an account during a period, unadjusted for churn during the same period. In measuring gross additions, we begin with account activations and exclude retailer returns, customers who have reactivated and fraudulent activations.


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Churn —used to measure customer turnover on an average monthly basis. Churn is calculated as the ratio of the net number of customers that disconnect from our service during the period being measured to the weighted average number of customers during that period, divided by the number of months during the period being measured. The net number of customers that disconnect from our service is calculated as the total number of customers that disconnect less the adjustments noted under gross additions above. These adjustments are applied in order to arrive at a more meaningful measure of churn. The weighted average number of customers is the sum of the average number of customers for each day during the period being measured divided by the number of days in that period. Churn includes those pay-by-the-minute customers whom we automatically disconnect from our service when they have not replenished, or “Topped-Up,” their accounts for 150 days as well as those monthly customers whom we automatically disconnect when they have not paid their monthly recurring charge for 150 days (except for such monthly customers who replenish their account for less than the amount of their monthly recurring charge and, according to the terms of our monthly plans, may continue to use our services on a pay-by-the-minute basis), and such customers that voluntarily disconnect from

our service prior to reaching 150 days since replenishing their account or paying their monthly recurring charge. We utilize 150 days in our calculation as it represents the last date upon which a customer who replenishes his or her account is still permitted to retain the same phone number. This calculation is consistent with the terms and conditions of our service offering.


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Net customer additions and End-of-period customers —used to measure the growth of our business model, to forecast our future financial performance and to gauge the marketplace acceptance of our offerings. Net customer additions represents the number of new customers that activated our handsets during a period, adjusted for churn during the same period. End-of-period customers are the total number of customers at the end of the period being measured.


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Adjusted EBITDA —used in our business operations to, among other things, evaluate the performance of our business, develop budgets and measure our performance against those budgets. Adjusted EBITDA is calculated as net income (loss) plus interest expense, income tax expense, depreciation and amortization, non-cash compensation expense, equity issued to a member, debt extinguishment costs, and expenses of Bluebottle USA Investments L.P. prior to the completion of the IPO.


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Adjusted EBITDA margin —used to measure our Adjusted EBITDA performance relative to our net service revenue so that we can gauge the performance of Adjusted EBITDA normalized for the increasing scale of our business. Adjusted EBITDA margin is calculated by dividing Adjusted EBITDA by our net service revenue.


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ARPU —used to measure and track the average revenue generated by our customers on a monthly basis. ARPU is calculated as net service revenue for the period divided by the weighted average number of customers for the period being measured, further divided by the number of months in the period being measured.


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CCPU —used to measure and track the cost of providing support for our services to our existing customers on an average monthly basis. The costs included in this calculation are (i) cost of service (exclusive of depreciation and amortization), excluding cost of services associated with initial customer acquisition, (ii) general and administrative expenses, excluding any marketing, selling and distribution expenses associated with initial customer acquisition, non-cash compensation expenses, and Bluebottle USA Investments L.P. general and administrative expenses prior to the IPO, (iii) net loss on equipment sold to existing customers, (iv) cooperative advertising expenses in support of existing customers, and (v) other (income) expense, excluding debt extinguishment costs and Bluebottle USA Investments L.P. These costs are divided by the weighted average number of customers for the period being measured, further divided by the number of months in the period being measured.


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CPGA —used to measure the cost of acquiring a new customer. The costs included in this calculation are our (i) selling expenses, (ii) net loss on equipment sales (cost of equipment less net equipment revenue), excluding the net loss on equipment sold to existing customers, (iii) equity issued to a member, (iv) cooperative advertising in support of existing customers and (v) cost of service associated with initial customer acquisition. These costs are divided by our gross additions for the period being measured.


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Free cash flow —used to measure cash generated by our core operations after interest and our ability to fund scheduled debt maturities and other financing activities, including discretionary refinancing and retirement of debt and purchase or sale of investments. Free cash flow represents net cash provided by (used in) operating activities less capital expenditures.

As the wireless communications industry continues to grow and consolidate, we continually reassess our business strategies and their impact on our operations. Our strategies have included pricing our handsets competitively to grow and maintain our customer base. We expect these strategies to continue in the future. As a result, handset subsidies may increase and could result in lower results of operations and cash flows. In addition, lower handset prices may increase the number of subsidized replacement handsets sold to existing customers at a loss as the customer replaces their existing handsets, resulting in additional cost to our business which would have an adverse impact on our results of operations and cash flows.

The lower handset prices may also make our services more accessible to new, lower-value, customers with less disposable income available to spend on our services. In addition, as handset prices decline and handsets become more disposable, customers without contracts may change their wireless providers more frequently, thereby increasing our customer turnover, or churn, and resulting in higher acquisition costs to replace those customers. Depending how quickly a customer churns, we may not be able to recoup our initial investment expended in acquiring the customer. A shift to lower value or less stable customers could have an adverse impact on our financial position, results of operations, and cash flows.

We continually monitor the impact of handset prices on the profile of our new customers, the behavior of our existing customers and our financial performance, and will make adjustments to our pricing strategy accordingly, including potentially raising prices.

We primarily rely on four third-party retail distribution channels for product placement within their stores to promote the sale of our handsets to grow our customer base. Our relationships with these distribution partners are strong and we expect the relationships to continue. However, there is no assurance that our distribution partners will continue to distribute our products. The loss of any of these four retail distribution partners could result in lower gross additions, account replenishments, or top-ups, and increased churn and therefore lower results of operations and cash flows.

The Federal Communications Commission, or FCC, and state public utilities commissions, or state PUC’s, regulate the provision of communication services. Future changes in regulations and compliance could impose significant additional costs on us either in the form of direct out-of-pocket costs or additional compliance obligations. We could be forced to increase our rates to cover these costs, making our service pricing less attractive to customers.

Our business has incurred, and may continue to incur, losses and costs associated with bulk handset purchase and trading schemes, whereby third parties purchase our subsidized handsets, unlock and reprogram them and sell them in bulk for use on other wireless communications providers’ networks. We have pursued coordinated efforts through investigations and legal actions, retail monitoring and policies, and technology to combat the potential for significant losses. However, if our efforts to thwart bulk trading schemes are otherwise unsuccessful, this could result in substantial costs to us, whereby we would not realize any service revenues from these handsets and incur substantial losses. We estimate that in 2007, 2006, and 2005, approximately 76,000, 322,000, and 228,000 of our handsets, respectively, were bought and resold in bulk, which resulted in a loss of approximately $5.2 million, $30.4 million, and $25.4 million, respectively, consisting primarily of lost handset subsidies and promotional expenses.

We earn revenues primarily from the sale of wireless voice and mobile data services, along with the sale of handsets through third party retail locations, our website or call center. Our services are available through a variety of different pricing plans, including flat-rate and monthly plans that offer the benefits of long-term contract-based wireless plans with the flexibility of pay-as-you-go services. In the third quarter of 2006, we launched a suite of new service plans that provided our customers the ability to buy monthly buckets of minutes in advance. The customers on these new monthly plans tend to have higher usage than flat-rate customers. We are in the progress of rolling out revamped pricing plans to our customers which will be fully deployed by the end of June 30, 2008. These plans are designed to simplify the competitiveness and value of our offers to our customers. The new pricing plans have a number of new options which will incent our customers to top up more often, as well as stimulate the adoption of our monthly bucket plans. We believe that the flexibility and competitive price points on these offers will help us retain customers and stimulate growth. As such, we expect these new monthly plans to contribute an increasing portion of our revenue going forward.

Results of Operations

Gross additions represents the number of new customers that activated an account during a period, unadjusted for churn during the same period. In measuring gross additions, we begin with account activations and exclude retailer returns, customers who have reactivated and fraudulent activations. These adjustments are applied in order to arrive at a more meaningful measure of our customer growth. Gross additions for the years ended December 31, 2007, 2006 and 2005 were approximately 3.4 million, 3.0 million and 2.7 million, respectively. This growth was primarily attributed to the expansion of our retail distribution network and the introduction of new service plans in 2006 that provide our customers with the ability to buy monthly buckets of minutes in advance. By focusing on consumer preferences and maintaining competitive product and service offerings, we anticipate being able to continue to attract new customers to our company. The specific level of gross additions in the future will depend, in part, on the level of competitive activity and customer movement in the marketplace, along with the suite of handsets and new technology that we will offer in the future. For example, our gross additions for the fourth quarter of 2007 slowed due to our decision to not match aggressive handset pricing by certain of our competitors which, historically, tended to primarily attract lower-value, lower tenure customers, along with the decline in consumer spending. Instead, we focused on attracting higher-value customers with handsets such as the successful WildCard, which we believe will bring in mobile data service usage that is significantly higher than that of our average customer. In addition, we believe our customer behavior could be impacted by the state of the economy. In particular, the recent economic downturn and “sub-prime mortgage” macroeconomic conditions could have an adverse impact on gross additions due to potentially lower disposable income for certain of our customers.

Churn is used to measure customer turnover on an average monthly basis. Churn is calculated as the ratio of the net number of customers that disconnect from our service during the period being measured to the weighted average number of customers during that period, divided by the number of months during the period being measured. The net number of customers that disconnect from our service is calculated as the total number of customers that disconnect less the adjustments noted under gross additions above. These adjustments are applied in order to arrive at a more meaningful measure of churn. The weighted average number of customers is the sum of the average number of customers for each day during the period being measured divided by the number of days in the period. Churn includes those pay-by-the-minute customers whom we automatically disconnect from our service when they have not replenished, or “Topped-Up,” their accounts for 150 days as well as those monthly customers whom we automatically disconnect when they have not paid their monthly recurring charge for 150 days (except for such monthly customers who replenish their account for less than the amount of their monthly recurring charge and, according to the terms of our monthly plans, may continue to use our services on a pay-by-the-minute basis), and such customers that voluntarily disconnect from our service prior to reaching 150 days since replenishing their account or paying their monthly recurring charge. We utilize 150 days in our calculation as it represents the last date upon which a customer who replenishes his or her account is still permitted to retain the same phone number. This calculation is consistent with the terms and conditions of our service offering. We believe churn is a useful metric to track changes in customer retention over time and to help evaluate how changes in our business and services offerings affect customer retention. In addition, churn is also useful for comparing our customer turnover to that of other wireless communications providers. For the years ended December 31, 2007, 2006, and 2005, our churn was 4.9%, 4.8%, and 4.3%, respectively. We believe that the slight increase in our churn for 2007, as compared to 2006 reflects some incremental losses associated with recent changes across our bucket offers, including the cap on unlimited usage for our $44.99 offer and higher pricing on over-the-limit usage. The increase in our churn for 2006 compared to 2005 reflects the absence of more competitive offers in the first six months of 2006 which were introduced during the second half of 2006. As with gross additions, the trends in our churn will continue to reflect the timing of new offers and products in the marketplace, as well as the seasonality of our business. In addition, as noted earlier, we believe our customer behavior could be impacted by the state of the economy, and the recent economic downturn and “sub-prime mortgage” macroeconomic conditions could have an adverse impact on churn, as customers reduce or stop their wireless usage due to economic constraints. Our ongoing lifecycle management programs, which target and incent specific customer segments deemed valuable to our business, will help to mitigate both economic and competitive pressure in the future.

Net customer additions and end-of-period customers are used to measure the growth of our business model, to forecast our future financial performance and to gauge the marketplace acceptance of our offerings. Net customer additions represents the number of new customers that activated an account during a period, adjusted for churn, during the same period. End-of-period customers are the total number of customers at the end of a given period. During 2007, we added a net 0.5 million customers to our base and, as of December 31, 2007, we had approximately 5.1 million customers. This represents a growth of 11.2%, as compared to the end-of-period December 31, 2006. During 2006, we added a net 0.7 million customers to our base. As of December 31, 2006, we had approximately 4.6 million customers, a growth of 19.0% when compared to the end-of-period customers of 3.8 million as of December 31, 2005. These net additions reflect a percentage share of new users in the marketplace as well as a percentage of customers that have switched to us from our competitors net of our competitive losses, or churn. We believe a decrease in the rate of net customer additions, as seen in our 2005 to 2007 annual performance, is typical of the effect of churn on an increasing customer base. In addition, as discussed under gross additions above, we believe the fourth quarter of 2007 was impacted by the slowing economy, as well as our decision to not match our competitors’ price-downs on low-end handsets and to, instead, continue to focus on attracting higher-value customers and improve our churn. With a continued focus on attracting new customers, we strive to maintain, on average, positive net additions, a growth in our customer base and an increase in our market share.

Non-GAAP performance metrics. We use several financial performance metrics, including Adjusted EBITDA, Adjusted EBITDA margin, ARPU, CCPU, CPGA, and Free cash flow, which are not calculated in accordance with GAAP. A non-GAAP financial metric is defined as a numerical measure of a company’s financial performance that (i) excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the comparable measure calculated and presented in accordance with GAAP in the statement of operations or statement of cash flows; or (ii) includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the comparable measure so calculated and presented. We believe that the non-GAAP financial metrics that we use are helpful in understanding our operating performance from period to period, and although not every company in the wireless communication industry defines these metrics in precisely the same way that we do, we believe that these metrics as we use them facilitate comparisons with other wireless communication providers. These metrics should not be considered substitutes for any performance metric determined in accordance with GAAP.

Adjusted EBITDA is calculated as net income (loss) plus interest expense, income tax expense, depreciation and amortization, non-cash compensation expense, equity issued to a member, debt extinguishment costs, and expenses of Bluebottle USA Investments L.P. prior to the completion of the IPO. We believe Adjusted EBITDA is a useful tool in evaluating performance because it eliminates items related to taxes, non-cash charges relating to depreciation and amortization as well as items relating to both the debt and equity portions of our capital structure. Adjustments relating to interest expense, income tax expense, depreciation and amortization are each customary adjustments in calculation of supplemental measures of performance. We believe such adjustments are meaningful because they are indicators of our core operating results and our management uses them to evaluate our business. Specifically, our management uses them in its calculation of compensation targets, preparation of budgets and evaluations of performance. Similarly, we believe that the exclusion of non-cash compensation expense provides investors with a more meaningful indication of our performance as these non-cash charges relate to the equity portion of our capital structure and not our core operating performance. The expenses of Bluebottle USA Investments L.P. also do not relate to our core operating performance and are, therefore, excluded. These exclusions are also consistent with how we calculate the measures we use for determining certain bonus compensation targets, preparing budgets and for other internal purposes. We believe that the exclusion of equity issued to a member and debt extinguishment costs is appropriate because these charges relate to the debt and equity portions of our capital structure and are not expected to be incurred in future periods.

We find Adjusted EBITDA to be useful as a measure for understanding the performance of our operations from period to period and although not every company in the wireless communication industry defines these metrics in precisely the same way, we believe that this metric, as we use it, facilitates comparisons with other wireless communication companies. We use Adjusted EBITDA in our business operations to, among other things, evaluate the performance of our business, develop budgets and measure our performance against those budgets. We also believe that analysts and investors use Adjusted EBITDA as a supplemental measure to evaluate our company’s overall operating performance. However, Adjusted EBITDA has material limitations as an analytical tool and you should not consider this in isolation, or as a substitute for analysis of our results as reported under GAAP. The items we eliminate in calculating Adjusted EBITDA are significant to our business: (i) interest expense is a necessary element of our costs and ability to generate revenue because we incur interest expense related to any outstanding indebtedness, (ii) to the extent that we incur income tax expense it represents a necessary element of our costs and our ability to generate revenue because ongoing revenue generation is expected to result in future income tax expense, (iii) depreciation and amortization are necessary elements of our costs, (iv) non-cash compensation expense is expected to be a recurring component of our costs and we may be able to incur lower cash compensation costs to the extent that we grant non-cash compensation, (v) expense resulting from equity issued to a member represents an actual cost relating to a prior contractual obligation, (vi) expense related to debt extinguishment represents a necessary element of our costs to the extent we restructure indebtedness, and (vii) expenses associated with Bluebottle USA Investments L.P. prior to the IPO. Furthermore, any measure that eliminates components of our capital structure and the carrying costs associated with the fixed assets on our balance sheet has material limitations as a performance measure. In light of the foregoing limitations, we do not rely solely on Adjusted EBITDA as a performance measure and also consider our GAAP results. Adjusted EBITDA is not a measurement of our financial performance under GAAP and should not be considered as an alternative to net income, operating income or any other measures derived in accordance with GAAP. Because Adjusted EBITDA is not calculated in the same manner by all companies, it may not be comparable to other similarly titled measures used by other companies. For the years ended December 31, 2007, 2006 and 2005, Adjusted EBITDA was $99.2 million, $47.9 million and $(48.3) million, respectively. The strong year on year improvement reflected growth in our customer base, net service revenue and cost benefits resulting from the increasing scale of our business, partially offset by higher costs to support our growing customer base including an increase in replacement handsets which grew by 81.4% to $69.0 million in 2007. As we may experience some decline in revenue resulting from lower usage and lower pricing, we have considered, and will continue to consider, appropriate measures to align our costs with the revenue that is being generated, including reducing our administrative costs or potentially raising our handset prices in order to reduce our subsidy. As an example, as noted earlier, during the latter part of 2007, we did not match the aggressive handset pricing of certain of our competitors. Instead, we focused on acquiring higher-value customers. The Sprint Nextel PCS services agreement was amended in March 2008 to provide that, among other things, we will not be subject to the true-up process with respect to the year ended December 31, 2007, see “Risk Factors”. Were we required to pay Sprint Nextel based on their actual costs for the year ended December 31, 2007, our Adjusted EBITDA could have been materially lower than our reported results.

Adjusted EBITDA margin is used to measure our Adjusted EBITDA performance relative to our net service revenue so that we can gauge the performance of Adjusted EBITDA normalized for the increasing scale of our business. Adjusted EBITDA margin is calculated by dividing Adjusted EBITDA by net service revenue. For the years ended December 31, 2007, 2006 and 2005, our Adjusted EBITDA margin was 8.1%, 4.7% and (5.5)%, respectively. The improvement in our Adjusted EBITDA margin over the three year period reflects the cost benefits resulting from our increased scale, partially offset by more competitive pricing on our offers and handsets and increasing costs to service our customers, principally the costs associated with increases in replacement handsets. The following table illustrates the calculation of Adjusted EBITDA and Adjusted EBITDA margin and reconciles Adjusted EBITDA to net income (loss) which we consider to be the most directly comparable GAAP financial measure.

ARPU is used to measure and track the average revenue generated by our customers on a monthly basis. ARPU is calculated as net service revenue for the period divided by the weighted average number of customers for that period being measured, further divided by the number of months in the period being measured. The weighted average number of customers is the sum of the average customers for each day during that period measured divided by the number of days in that period. ARPU helps us to evaluate customer performance based on customer revenue and forecast our future service revenues. For the years ended December 31, 2007, 2006 and 2005, ARPU was $21.02, $21.48, and $22.54, respectively. The decline in ARPU over the three year period reflected the more competitive pricing on our new monthly pay-as-you-go plans and some decline in usage on our prepaid plans, which more than offset a mix shift to higher usage monthly customers, as well as increased customer penetration and usage for our mobile data services, the latter stimulated by new offerings and new handsets. We expect to continue to experience some downward pressure on ARPU as prices decline and as the recent economic downturn may cause some customers to reduce their usage due to lower disposable income; however, such pressure may be partially offset by a continued shift to higher value customers and by increased penetration of new services. For example, we have seen a recent increase in text messaging usage from our customers who purchased the WildCard handsets. The specific impact of prices on our ARPU will depend upon the mix of pricing plans that our customers choose. The following table illustrates the calculation of ARPU and reconciles ARPU to net service revenue which we consider to be the most directly comparable GAAP financial measure.

CONF CALL

Erica Bolton

Welcome to Virgin Mobile USA’s second quarter 2008 results conference call. Joining me today on the call are Dan Schulman, Chief Executive Officer, John Feehan, Chief Financial Officer, and [Steve Koffel], Vice President and Treasurer.

Our earnings release went out at 4:15 this afternoon and is available at our investor website www.investorrelations.virginmobileusa.com.

Please note that this presentation of results will include forward-looking statements. These statements which reflect our current reviews with respect to future events are not guarantees of future performance and involve risks and uncertainties that are difficult to predict. Further, certain forward-looking statements are based upon assumptions about future events which may not prove to be accurate. We provide a detailed discussion of various risk factors in our SEC filings and I strongly encourage you to thoroughly review these filings. We plan to file our 10Q for the second quarter tomorrow and we encourage you to read this as well.

We’ll refer to several non-GAAP metrics in our call. Reconciliations of our non-GAAP measures to the appropriate GAAP measures for the second quarter and for the first half of 2008 can be found at the end of our earnings release and in our SEC filings.

Today Dan and John will give you an update on second quarter and first half 2008 operating results and the outlook for the remainder of 2008 and then take any questions you may have.

And now I’d like to turn the call over to Dan Schulman.

Daniel H. Schulman

Our results for the first half of 2008 were strong versus our plan and results in the second quarter not only exceeded our expectations but also showed improving trend lines across many important metrics.

We produced 728,000 gross customer additions during the quarter and a net loss of 111,000 customers which was significantly better than our earlier estimates. Our churn results were better than our expectations at 5.6% for the second quarter compared to 5.7% in the second quarter of 2007. In what has traditionally been our highest churn quarter we were able to produce better than expected churn due to ongoing improvements in our value proposition, lifecycle customer management initiatives, and enhancements in our churn segmentation modeling.

Churn for the first half was 5.3% and we are on track to achieve our churn guidance for the full year. We added more than $1.5 million customer gross adds in the first half of the year and recent trends reflect increasing favorable demand. While our gross add-its for the first half are 9% lower than last year, these trends are improving each quarter with the gap in growth steadily narrowing as many of our operational and marketing initiatives have been put into place.

Gross customer additions were down 7% year-over-year in the second quarter compared to a decline of 10% in the first quarter and we expect that the third quarter will show continued improvement. In fact, we expect Q3 gross adds to be roughly equivalent to Q3 2007 gross adds.

We’re very pleased with the early strength and adoption of our new plans as they have been rolled out during the current quarter. Gross customer additions for the month of July hit our expectations and our plans are clearly connecting with consumer demand. Our new offers are extremely competitive and we believe that they offer some of the best value in the industry especially for the more than 80% of consumers that use less than 1,200 minutes per month.

The recent launch of our Totally Unlimited $79.99 calling plan is performing above our expectations. This is the best value nationwide unlimited plan for consumers with no roaming charges and no credit card required. Usage on this plan is trending below our plan levels and therefore these customers are some of our most profitable on an absolute ARPU margin dollar basis.

Another excellent trend we are experiencing is the growth in hybrid adoption with the launch of our new monthly service plans. As these plans roll out across our retail footprint, monthly plan adoption has been steadily growing from approximately 32% of our gross adds in the first quarter to 45% in June. This trend is continued into Q3 as 47% of our gross adds in July were on our monthly plans. This trend is beneficial in two ways. First, increased monthly payments in the base provide consistency and stability to our revenue streams. Second, with our lowest monthly plan priced at $20.00 this strong hybrid performance should improve our overall ARPU trend throughout the rest of this year.

In the second quarter we produced $291 million of net service revenues and adjusted EBITDA of $32 million which was up from $31 million a year ago and handily exceeded our guidance. While net service revenues were down year-over-year reflecting the previously forecasted impact to customer usage, our adjusted EBITDA margin improved to 11.1% from 10.1% in the second quarter of 2007 reflecting ongoing operational discipline. We were able to produce improving profitability even as we spent an incremental $5.8 million in marketing spend during the quarter compared to a year ago in order to support the launch of our new offers.

Adjusted EBITDA for the first half of 2008 was $61 million, again well exceeding our expectations and our guidance for the first two quarters of the year. And we did this while investing an incremental $13.3 million of marketing spend in the first half of the year versus last year, which was actually $3.3 million more than the $10 million we originally guided to.

We’ve continually stressed that the hallmark of an [MV&O] is scale is free cash flow and our results for the first half reflect this key strength of our business model. We are able to produce very strong free cash flow due in part to minimal capital needs. In the first half of 2008 we produced $29.2 million of free cash flow which includes payments for interest expense and capital expenditures. This is up 146% from the first half of 2007 and clearly demonstrates the operational discipline instilled in our business.

Our results exceeded our expectations across the board in the second quarter and for the first half. I’m particularly pleased though with the improving trends in the business we saw in the second quarter and these trends are continuing into the third quarter. These results are a direct outcome of the many initiatives we rapidly implemented in response to a challenging retail environment. The management team put in a lot of hard work and planning, and it is gratifying to see these efforts begin to take hold in the market.

Along with the rollout of new plans during the second quarter, we also launched two new handsets; the Slash and the Arc; and began the expansion of our retail presence into American Wireless and Sears. We also increased our presence at Wal-Mart which began towards the end of the quarter. The Slash is continuing our trend of very strong sales for our higher-end handsets. At $79.99 the Slash joins the Wild Card in our high-end lineup and strong sales of these phones bode well. As we’ve said before the LTV or lifetime value and churn profile for these customers is much better than it is for our low-end phones.

We also made a number of important strategic announcements during the quarter that position Virgin Mobile for growth in 2009 and beyond. The most significant was the announcement of our acquisition of Helio. We remain quite positive about the potential for this acquisition and the implications it has for our customer base, financials and ongoing growth prospects. We continue to expect this transaction to be accretive to adjusted EBITDA in 2008 and to adjusted EBITDA and free cash flow in 2009.

As I discussed on the call in June Helio is contractually required to cut their costs by approximately 70% before the deal closes and they are on track to do this. In the six weeks since we spoke to you in June, Helio has reduced their staff by more than two-thirds and have closed nearly all of their retail stores and kiosks.

Helio is already getting the cost benefit of our network rates. We’re very pleased with the progress being made on the cost side and we remain confident in our expectations for the business. We hope to close this deal in the next few weeks. The Helio acquisition is transformative for us. The addition of a post-paid platform, outstanding data services, and compelling handsets will enable us to offer more value to our entire customer base; prepaid, hybrid and post-paid alike.

Our integration teams are working hard behind the scenes to put together compelling products and services, and we are excited about the prospect of launching differentiated plans, handsets and services over the next several quarters.

During the quarter we also announced an outsourcing agreement with IBM for our back office operations and applications development. This is a significant transaction or us. It provides additional capabilities and improved time to market performance and will also result in significant cost savings. The moves to IBM will allow us to gain the benefit of IBM’s investments in mobile technology to deliver even more reliable service and applications to customers, bringing new products to market more quickly, and dynamically respond to market trends.

This transition which will greatly fortify our technological infrastructure also means we will close our Walnut Creek offices. As a result we will incur approximately $9 million in incremental one-time costs this year and about $2 million next year due to the closing of our offices and the associated headcount reductions. However, this initial investment is expected to produce over $50 million of IT operational cost savings over the next four years.

We are maintaining our outlook for 2008 on all metrics even with the incremental one-time costs associated with our IBM outsourcing which was not contemplated at the time of our original guidance. Furthermore, we expect to come in at the high end of our guidance for free cash flow. The scale and flexibility inherent within our model provides us the ability to maintain ongoing profitability and cash flow generation while continuing to invest in growth.

As I said up front, the second quarter was better than our expectations and we are beginning to see the fruits of our labor across multiple fronts. We’re cautiously optimistic about the remainder of the year and believe the initiatives we have implemented will result in positive growth in the second half of the year and into 2009.

I’ll now turn it over to John to go through the financials in more detail and then I’ll come back and we’ll take your questions.

John D. Feehan, Jr.

We performed better than our expectations in the second quarter across a number of key metrics and produced good profitability along with strong free cash flow while we continued to invest in growth. In the second quarter we produced total net service revenues of $291.4 million, generated adjusted EBITDA of $32.3 million, and produced $18.8 million of free cash flow which includes interest expense and cap ex. Cash flow is the strength of our MV&O business model and our ongoing ability to produce strong free cash flow will only be improved by the upcoming acquisition of Helio and the related investments by Virgin Group and SK Telecom.

The upcoming acquisition is expected to approve our cash flow profile on two fronts. First, through the expected $50 million pay down to our Term B loan, which will reduce our net debt by at least $35 million. We expect our cash flow to improve by about $6 million to $7 million a year from the reduction to our debt service. Second, we expect to enjoy organic cash flow accretion from the contribution of Helio’s customers. This transaction has a multiplicity of very important benefits both strategic and financial, not the least of which are the very clear and substantial improvements to both liquidity and flexibility to manage the business under our debt covenants.

Across all of our key metrics the core VMU business performed well in the second quarter and results came in on or better than our expectations. We believe we have planned well in a year that presents plenty of challenges for everyone, and we are cautiously optimistic about the current customer behavior we’re observing in the base.

Our monthly hybrid plans continue to perform well with gross customer additions from hybrid plans steadily growing from 38% of gross adds in April to 45% of gross adds in June resulting in 24% of our customer base on these monthly offers at the end of the quarter. This trend in hybrid strength has continued in Q3 reaching 47% in July. The trend is very encouraging and we believe will help contribute to an improvement in ARPU trends and help stabilize revenue streams going forward.

We had approximately 111,000 net customer losses for the second quarter 2008 an increase in loss from the second quarter of 2007 but much better than our expectations. The second quarter is our seasonally weakest for net customer additions and negative net customer additions is expected due to the dynamics of our churn rule and normal consumer behavior. However, we were able to produce an improved result due to churn being better than expected for the quarter. Churn in the quarter was 5.6% which was better than our expectations. This churn was due largely to some successes in our lifetime customer management efforts and some excellent predictive modeling put in place to continue to identify high-value customers at risk. We also believe that stronger sales of our high-end handsets during the past few quarters is contributing to the churn improvement. We are very pleased with the Q2 results which bolster our confidence in our full-year guidance for churn in the mid-5% range.

Total operating revenues for the quarter were $317 million down by 3.1% year-over-year. This reflects the decline in customer usage and migration of our higher-end prepaid customers to hybrid partially offset by net additions to our higher ARPU hybrid plans as well as increasing equipment revenues reflecting the popularity of our higher-end handsets.

We are also seeing greater penetration of data services with data growing to 18% of net service revenues in the second quarter. Last year revenues also had the favorable impact of E911 tax refunds and settlements. ARPU for the quarter was $19.32 down slightly from the first quarter ARPU with usage levels on the prepaid side remaining stable albeit at lower than historical averages. These results are right in line with the expectations we modeled and are consistent with our guidance for the full year. The trends we are seeing with hybrid adoption and the uptake of the Totally Unlimited plan are encouraging and we do expect an improvement to ARPU trends in the second half of the year.

We continue to drive more efficiency within the business which reflects our ongoing operational discipline, and we expect to continue to improve efficiencies on a per unit basis throughout the next two quarters. Cost of service was $82.4 million for the second quarter a decline of 8% from the second quarter of 2007 which partially reflects our improving network economics. CCPU for the quarter was $11.71 compared to $13.54 in the second quarter of 2007 resulting from lower usage trends and improved network costs as well as the benefits of our operating efficiencies with our per unit care costs coming down by 29% year-over-year. This was partially offset by the impact of net additions of hybrid customers who have higher usage levels but also have a much higher ARPU margin dollar contribution.

CPGA for the second quarter was approximately $113.00 and represents one of the lowest acquisition costs in the business. There were a couple of dynamics to this CPGA number that pushed it up slightly which we think were all positive. During the quarter we continued to have higher-than-expected handset sales of the Wild Card and our new Slash performed much better than expected which when offset by higher revenues from these phones added just over $1.00 to CPGA. As disclosed on the last call, we also opted to invest more in marketing during the quarter in order to publicize the rollout of the new plans which equated to about $4.50 in CPGA. Overall we are very pleased with the results for CPGA with a slightly higher investment reflecting very positive trends in the base. We remain comfortable with our full-year guidance for CPGA of around $110.00. Our CPGA is consistently one of the lowest in the industry and we expect to remain industry leaders in this metric.

Selling, general and administrative expenses for the second quarter were $106 million a decline from $110 million in the second quarter of 2007 and $219 million for the first six months of 2008 compared to $220 million for the first six months of 2007. This decline actually reflects a few incremental items offset by some of the planned operating expense efficiencies we have discussed over the past couple of quarters. As I’ve mentioned we’ve had an incremental $13.3 million in marketing expense year-over-year in support of our new plans. Even with the incremental marketing spend in the first half of the year, we are on the run rate necessary to achieve our goal of $15 million to $20 million of planned operating expense improvements on an absolute dollar basis in 2008.

A couple of examples of this are an improvement of $9.5 million in customer care costs as we continue to see the benefits of partial off-shoring as well as an improvement of $7.3 million in IT spending as we streamline some of our vendor relationships. This IT savings also includes some initial savings due to headcount reductions with our planned outsourcing to IBM which was offset by about $1 million of costs relating to the transition to outsourcing which we’ve already incurred. With further planned reductions in these areas and marketing in the second half of the year we are confident in the $15 million to $20 million reduction we have outlined to you previously.

We produced adjusted EBITDA of $32.3 million for the quarter versus $31.2 million for the second quarter of 2007. Adjusted EBITDA for the first half of 2008 was $61 million compared to $72.9 million in the first half of 2007. There were a number of items in the first half of 2007 which benefited adjusted EBITDA including a one-time benefit due to the transition to consignment as well as a benefit from E911 tax refunds and settlements. When you exclude the incremental $13.3 million we spent in marketing in the first half of the year, our adjusted EBITDA for the first half of 2008 well exceeded our results in the first half of 2007. In a difficult economic environment we are very pleased with these results and with our ability to make continued operational improvements to produce strong profitability.

Net income for the quarter was $3.5 million or fully diluted $0.07 per share compared to net income of $7.1 million or pro forma $0.11 per share for the second quarter of 2007. The pro forma EPS for 2007 adjusts for the share count only which is a more relevant comparison.

It’s important to note that we had a couple of items in our results that did not exist last year prior to our IPO including $2 million in minority interests and a $6 million accrual for payment of our tax receivable agreement to Sprint and Virgin Group. As we were not taxpayers last year and we are effectively taxpayers going forward through our tax receivable agreements, this is incremental to the year-over-year comparison. In aggregate we had $8 million of effective tax payments and minority interest expense which impacted net income in second quarter of 2008 and is incremental to our financials in the second quarter 2007 pre-IPO.

Going forward with the close of the Helio transaction we expect reported earnings per share to be impacted by non-cash items such as the amortization of intangible assets resulting from the purchase price valuation. Thus, going forward we will report an adjusted EPS number excluding these non-cash items.

Capital expenditures for the quarter were $3.1 million or just 1% of net service revenues. Our consistently low level of capital expenditure is a hallmark of the MV&O business model and its ongoing stable cost efficiency of the business means we expect to continue to produce strong free cash flow as we increase our scale. Interest expense was $7.9 million compared to $13.9 million in the second quarter of 2007 reflecting the benefits of our improved capital structure following our IPO.

With the upcoming close of the Helio transaction and our anticipated $35 million to $40 million reduction to net debt, both our interest and amortization payments will be brought down pro rata. Therefore, we expect interest in future quarters to decline and our cash flows to show the reciprocal benefit. In addition, with the increase to the revolver from $75 million to $135 million we will have an ongoing benefit under our debt covenants to the tune of tens of millions of dollars. This transaction will provide us ample room to make the right decisions for the growth of the business with covenant room effectively being eliminated as part of the equation in our decision-making process.

During the second quarter we generated $18.8 million of cash flow including interest payments and capital expenditures. For the first half of the year we generated $29.2 million of free cash flow and excluding interest payments of $16.6 million the unlevered free cash flow number was $45.8 million. This strong performance gives us clear confidence in our guidance of free cash flow before interest payments for the full year 2008 of $55 million to $65 million. Our better-than-expected cash flow results enabled us to pay down our revolver $5 million from the existing Q1 levels.

Due to this strong performance we expect Virgin Mobile without the Helio acquisition to be at the high end of our cash flow expectations for the year. We are extremely pleased with our ability to generate strong cash flow and the close of the Helio transaction will create a much-improved cash flow profile for the business on an ongoing basis. Given the terms of our agreement with Helio we will see a one-time impact to cash flow in the second half of the year due to our previously-disclosed commitment to certain working capital liabilities and debt payments. However, we expect the transaction will substantially improve our cash flow outlook for the long term.

In the second quarter we continued to invest in the future growth of the business as we fully realized the rollout and launch of the new plans and shipped additional handsets to support our expanding distribution. We now expect to begin to reap the benefits of these initiatives in the second half of the year, and we are already beginning to see this reflected in our current financial results.

We are excited about the future growth prospects of our current initiatives we have in place and we continue to be comfortable with our guidance for 2008 even as we invest in incremental growth opportunities.

With that I’ll turn it back to Dan for his closing remarks.

Daniel H. Schulman

Before turning it over to your questions, I’d like to review our outlook for the third quarter and the remainder of 2008. The economy obviously remains a challenge for everyone but in this context our business is performing well and we are on track and implementing our plans for growth and continued operational efficiencies. We’re seeing the fruits of these efforts with trends across many of our key metrics in the business improving quarter by quarter. We remain confident in our 2008 stand-alone guidance across all metrics. Even with the number of incremental growth opportunities and costs that were not originally in our plan at the beginning of the year, we are comfortable with our adjusted EBITDA guidance for the year and as John mentioned we expect our free cash flow before interest expense to be at the high end of our original guidance. Our original guidance was $45 million to $65 million. Our new guidance is for our cash flow before interest expense to be between $55 million and $65 million.

In the third quarter the impact of our new voice and data plans as well as our expanded retail footprint is expected to continue the positive trends we witnessed in our gross adds from Q1 to Q2 with year-over-year trends further improving to produce flat gross adds compared to the third quarter of 2007. Third quarter net adds are expected to be in the range of -20,000 to +20,000 and we believe our churn estimates for the full-year 2008 will remain at the mid-5% range. Third quarter net service revenues are expected to stabilize versus the second quarter and are expected to be in the range of $285 million to $295 million. Third quarter adjusted EBITDA is expected to show significant growth of about 20% to 40% versus last year and be in the range of $20 million to $24 million and our third quarter EPS is expected to be in the range of $0.00 to $0.03 per share.

I’d like to conclude my remarks by reiterating that our second quarter results reflect the effectiveness of the initiatives we’ve put into place and our ability to plan and execute through a challenging macro economic environment. As I mentioned our metrics are beginning to show improving trends with the negative year-over-year growth subtly narrowing and we expect this to continue. These initiatives along with the upcoming Helio acquisition position us well as we enter the second half of 2008 and position 2009 to be a year of growth. We are highly focused on our customers and the value we provide them. Our cost structure continues to improve and our free cash flow yield is the best in the business and is expected to grow significantly this year. As John mentioned all of us here at Virgin Mobile are focused on executing against our plan, building value for our customers and our shareholders and we’re excited and energized by the opportunities in front of us.

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