The acquisition announced Tuesday calls for Sprint to pay US$5.50 in stock for each Virgin Mobile share.

Sprint already owned 13.1 per cent of Virgin Mobile, which uses Sprint's network to offer service.

The offer is a 31 per cent premium to Virgin Mobile's closing share price Monday of US$4.21.

In early trading Tuesday, the shares rose US$1.05, or 25 per cent, to US$5.26.

Better plan

Virgin Mobile resells access to Sprint's wireless network for people who lack the credit or income to sign monthly plans.

It has 5.2 million subscribers who pay an average of $20 per month. Sprint has 49.1 million subscribers, including those using the network through wholesalers like Virgin Mobile.

The deal reinforces this year's main trend in wireless: The top two carriers, Verizon Wireless and AT&T Inc, are grabbing the high-value contract customers, while Nos. 3 and 4, Sprint and T-Mobile USA, are left to compete for prepaying customers with smaller upstarts like MetroPCS Communications Inc and Leap Wireless International Inc.

Sprint roiled the industry by introducing a US$50-per-month prepaid unlimited plan in January under its Boost brand.

That made for an awkward relationship with its customer Virgin Mobile, which had a $80-a-month plan.

In April, Virgin Mobile was able to introduce its own US$50 plan after negotiations with Sprint.

Rare profit

Virgin Mobile's stock started the year at 84 cents, but news of the unlimited plan sent it zooming, and it continued its climb after the carrier posted a rare profit for the first quarter, even though it lost subscribers.

Sprint said it would keep the Virgin Mobile brand. Dan Schulman, Virgin Mobile USA's CEO, will run Sprint's prepaid business when the deal closes late this year or early next.

Sprint plans to retire Virgin Mobile USA's outstanding debt, which is expected to be no more than US$205 million, on September 30.

Virgin Mobile shareholders will own about 3.0 per cent of Sprint. British billionaire Richard Branson's Virgin Group owns 28.3 per cent of Virgin Mobile.

South Korean carrier SK Telecom has a 15.3 per cent stake that it got when Virgin Mobile last year bought Helio, another prepaid carrier that uses Sprint's network.

- AP