Virgin Mobile USA’s stock plunges on Q4 results: Quarterly loss digs into full-year gains

Virgin Mobile USA Inc. stock dropped more than 53% from its closing price yesterday after it reported a $14.7 million loss in the fourth quarter. The mobile virtual network operator (MNVO) did, however, report net income of $4.2 million for the full year, making 2007 the company’s first year to end in the black.
The five-year-old company ended the year with nearly 5.1 million customers after adding 209,669 customers in the fourth quarter and 511,796 for the entire year. This was down significantly from the subscriber growth it experienced in 2006 when the company added 613,752 customers in the fourth quarter that year and brought in 729,313 for the entire year.
Churn increased incrementally from 4.8% to 4.9% for the year, yet dropped from 5.6% in the fourth quarter of 2006 to 5.1% in the last quarter of 2007.
Virgin Mobile USA’s stock has steadily declined during the past month despite preliminary results released in early February that first indicated the company would end the year with a loss of $3 million to $6 million.
When the company went public in October, its stock sold at $15 per share. It has steadily fallen since then — hitting an all-time low of $1.91 in early morning trading today.
CEO Dan Schulman has said the carrier is sitting out the aggressive handset pricing wars many MVNOs waged to build long-term growth. The company suffered Wall Street’s wrath before on concerns with that business model.
“We maintained a disciplined customer acquisition strategy; while competitors were aggressively lowering prices in the fourth quarter to impact gross adds, we chose not to pursue what historically have proven to be low-value, low-tenure customers,” Schulman said.