Virgin/Sprint PCS deal in the works

After months of speculation and no comment from Sprint PCS, the carrier today confirmed it is negotiating a possible mobile virtual network operator (MVNO) deal with Virgin Mobile.

Sprint PCS said the two companies have agreed on preliminary matters but no definitive agreement has been reached, cautioning that there are no assurances that any transaction will be consummated.

Sir Richard Branson, chairman and founder of Virgin Group, has been trying to enter the United States for more than a year. His goal is to become the world’s first global MVNO. The company has built a business in the wireless industry by forming partnerships with existing operators to sell mobile services under the Virgin brand name. Branson has taken this concept to the United Kingdom, Australia and Asia.

In the U.S., Virgin plans to offer service and product offers targeting the youth market, capitalizing on its strong name in the record industry.

Still, many carriers remain skeptical of the MVNO model, said Richard Siber, partner with Accenture.

“U.S. carriers are not compelled because they’ve seen the terrible reseller model and have been comparing MVNOs with resellers,” said Siber. “They are more than resellers, because they have a brand that is appealing to a segment carriers don’t normally target.”

VoiceStream Chairman and CEO John Stanton recently told analysts that MVNO strategies that work in Europe may not necessarily work in the United States.

“To compete as a common carrier in the U.S. is difficult,” he said. “Resellers [would find] it difficult, because prices are declining, and we and our competitors already are meeting specialty interests.”