Virgin Mobile Scoots Higher

Virgin Mobile (VM) shares rose 6% in their public debut Thursday.

The prepaid wireless shop, which sells Sprint's (S) service under the Virgin Mobile brand, had priced its initial public offering Wednesday evening at $15 a share, the low end of the company's declared $15-to-$17 expected price range.

Virgin execs rang the bell at the New York Stock Exchange Thursday morning, and the company sponsored a promotion outside the exchange that featured women wearing Virgin Mobile shirts riding on Segway scooters.

Co-owned by Sprint and Virgin Group, the wireless reseller has about 4.8 million users who pay for calls either on a month-to-month basis or by the minute. The service targets the youth market, typically kids with limited credit history.

The company says it plans to use a large portion of the $415 million in proceeds to pay off debt and buy out a portion of Sprint's holdings. As of June, the company had $522 million in total debt and planned to reduce that level to about $322 million with the IPO proceeds, according to its filing.

Investors have cooled to wireless resellers in the wake of a couple notable failures. Earlier this year the ESPN Mobile and Disney Mobile units of Disney (DIS) called it quits on their mobile phone ventures.

Virgin Mobile lost $20 million on $1.1 billion in sales last year. In the first two quarters of this year, the company swung to a $29 million profit on $666 million in sales. But subscriber growth has slowed down significantly.

Last year the company added 729,000 net new subscribers, about half the number it added in 2004. Contributing to the growth slump was an increase in customer defections. The monthly churn rate went to 4.8% last year, up from 3.9% in 2004. The standard churn rates in the wireless industry are usually 1% to 2%.

Other wireless players like AT&T, Verizon Wireless and T-Mobile all have their own prepaid plans in addition to annual contracts. Sprint also runs Boost, another prepaid service targeted to teens.

Virgin Mobile shares were trading at $15.83 Thursday.

To watch Scott Moritz's video take of this column, click here.