Dear Senior Team

I just wanted to give you a Walnut Creek update. Week 2.

One disclaimer, the information below is directional and work in progress. There may be faux pas, and inaccuracies!

IT

The IT team completed an intense ‘due diligence’ session with IBM on Thursday and Friday. It all went off pretty well – with stellar performances from the whole VMU team as we have come to expect. 30 subject matter experts from IBM were holed up in the Marriot and there were a series of meetings and information gathering sessions coordinated by Kim.

IBM will now retreat for a week to finalize their proposal (financial), and come back to the Creek in two weeks to engage with the VMU IT team on their proposed transition plan. This will be a pretty critical plan, as it will give us the first sense of how IBM will operationalize their proposal. There is some concern from the VMU IT team that IBM will not understand the nuances of our business, (the releases, holidays, new projects, technical architecture) – and there is some concern on the IBM side that the VMU guys will not be open to ‘new ways’ of doing things. The financial proposal we have from them is dependent on doing it IBM’s way, clearly they have the experience and have done this many times before, but they will need to engage our guys through the transition as well. The transition will benefit enormously if the VMU team believe that IBM can handle what they have created over the past seven years. We meet again on April 9th in Walnut Creek for a couple of days to synch up on all of this. It will be a critical time.

The plan beyond that is for IBM to start interviewing our guys in mid April – and offer jobs to people they believe critical to the core VMU team to be located nearby in San Ramon, subject to a successful contract being signed with VMU. We are aiming to have that contract (which is a substantial one!) approved at the May 15th Board meeting. From then on IBM will be driving both the day to day – and the move towards their future mode of operation.

I don’t intend that ANY business projects are disrupted throughout all of this. Clearly there will be some unplanned disruptions, but we are incenting critical VMU people to stay through a 6-9 month period of transition, as well as IBM having a core team and ‘shadow resources’ in place. This may be bumpy, but I am planning on getting most of the work done.

HANDSETS

The whole handset team is incented to remain with VMU until the end of the year or relocate to NJ. Doug has made it clear that NJ isn’t on his list of possible homes, so we will begin a search for a new VP of Handsets (reporting to Sue) in the coming weeks, and I expect this to take at least until September. At that time I am hoping that a handful of people in the current handset team will decide whether or not to come east, and we will build the new team up in Q4 around these people.

The process of handset testing, and engineering is being outsourced to Accenture. Accenture do this for Verizon and Sprint, as well as Vodafone and other Carriers in the US and globally. Accenture will be responsible for interfacing on our behalf with handset OEM’s and application developers.

A small team from Accenture will begin scoping our existing processes and putting a plan in place during April, and in May-July will ‘shadow’ our existing QA team and Engineers. When the last 2008 handset is tested and confirmed (EVDO handset) they will be in charge from that point. The handset QA leads and some of that team are likely to remain through Q4 to update regression models and prepare for the 2009 range to hit.

The Accenture handset team will be scalable for our handset needs and be located in NJ from Q4. There will be some dedicated technical resources on the VMU side to manage them, and to manage the handset technology roadmap, reporting to the Handset VP.

Again, I am grateful for the attitude and professionalism of the existing handset & QA teams.

CARE HQ

The intention again, is to relocate the function of this team to Warren. We are hoping that some of the existing team will move to NJ, and we will supplement these people both in NJ and in one of our onshore centers. It is likely 5-10 people will be here in Warren.

Timing for this transition is still loosely ‘before holidays’ and is being worked by Ted and Dave as well as Kat, Brandon and Judith.

There is a lot of intellectual property here – knowledge of every nuance of every offer that our customers are on. Every time I spend time in this department – I get a ‘real world’ view of our customer experience breakdowns, and I am keen not to loose these learnings and remedies in this transition.

Very much still work in progress here but I think we will have a plan within the month of April.

FINANCE

The small finance team there continues until approximately the end of the year. The issues here are similar to those of IT. I won’t repeat them.

One thing I am aware of is the need for a financial plan to integrate our POR opex plan, with all these IT and Handset outsource projects – and manage this to an ‘on plan’ outcome by year end. Synching the assumptions we made before we executed this plan – with the real costs and changes is very central to my thought process. We are flying a little blind currently – and will need to get a good view as we go through April. Again, I am relying on G and team here, supported by Marie.

IN SUMMARY

I have to say I am humbled by the VMU team. It doesn’t feel at all good to walk those corridors a week after our announcement, and only just over two weeks since we made this decision. However the attitude in the most part is philosophical to positive and whilst I am sure there are some furious job searches going on, and deep regret – there is still a commitment which is a great start. I am heartened by the number of people who acknowledge openly that they think it is the best decision for the business, even if it’s not the best for them.

As IBM moves towards a transition post May, I expect we will enter a new phase, a changing environment with new faces. People will leave and others will join IBM. As changes start to materialize, it will be a new challenge for the old VMU team to remain engaged. Obviously both the VMU Leadership Team and IBM will need to be aware, realistic and manage these changing times, for everyone’s benefit.

Please reach out to me with any questions or concerns. I will try and keep you all updated every few weeks. I know Jim is communicating with the whole team there this coming week.

JM.

All,

Jonathan, David, John and I have just finished the all employee meeting out here in Walnut Creek in which we shared some significant decisions that we have made about how the company can move forward most successfully.

2007 was a year in which we set the stage for a new strategic direction for the company by achieving more than 5 million customers, $100M in adjusted EBITDA, our first year of profitability and successfully completing the IPO. Since the end of last year, we have been working with the Board to define our vision and to begin implementing a strategic outlook that will support future growth. This will require some key changes in our operating model that impact many of us in the company, so I want to share these decisions with you and the compelling reasons for making them.

First however, I want to give you my perspective on our stock performance and our current status as a public company. Virgin Mobile USA is profitable, and we expect to show strong growth in EBITDA, earnings per share and free cash flow this year. The market’s negative reaction after our Q4 and 2007 earnings call was because our revenue and EBITDA growth did not meet the street’s expectations. It is not a reflection of the facts that demonstrate the increasing financial strength of our company. We are being prudent in our estimates for 2008 because we recognize these are tough economic times and we expect them to continue for some time. We continue to be committed to long-term growth and delivering the level of results that will lead to a very different market valuation. The Board recognizes our achievements and strongly supports our plans.

For us to achieve this growth and this level of results we have two clear goals. We need to continue to become more integrated and flexible so that we improve our customers’ experience through a better integrated portfolio of services and are able to respond more rapidly to the market than our competitors. We also need to relentlessly focus on improving our bottom line by finding new more efficient ways to work and leveraging our scale.

In the context of these goals, we announced today that we will be consolidating the company into one location in Warren NJ and that this transition will be complete by Q1 2009. We believe this will help us drive better integration and dramatically improve the company’s productivity and cost structure. As part of this move, we will be fully outsourcing IT to IBM by the end of Q3 this year. We will be integrating the Handset and Care HQ teams into NJ and anticipate that the transition for Care HQ will be completed by the end of Q3 this year and for the Handset team by Q1 2009. We will be finalizing the detailed transition plans over the next several weeks.

All companies regularly review outsourcing as a matter of course nowadays and in fact the most major telecoms and wireless companies do outsource all or significant parts of IT. Outsourcing IT will allow us to access and leverage IBM’s broad range of capabilities that it is just not possible for us to re-create internally. It will also significantly reduce our operating costs which will allow us to reinvest more in the company’s growth in the years ahead. We are going to need to update and expand our systems significantly over the next few years, well beyond the range of current projects like the new rating platform and EVDO, and it will become cost prohibitive for us to do that in-house on the timeframe the market will demand of us. Leveraging a partnership with IBM will allow us to take advantage of their investments in R&D, disaster recovery and new technologies and wireless products.

The first stage in the transition will be to finalize details of the contract with IBM which we expect to do by May and they will be sending out data questionnaires next week and be on-site starting to meet with our team the week of March 31. After the contract is finalized there will be a four-month transition period with IBM staff working alongside Virgin Mobile teams.

We anticipate 30-40 IT employees will be offered jobs in IBM’s San Ramon office, continuing to work on Virgin Mobile’s systems and that IBM will make these offers over the next two months. IBM is also always looking for good talent and other IT employees will be able to apply for any open positions in IBM. We want everyone to stay and stay focused through the transition, and also to support everyone in finding a new opportunity, if they do not move to IBM, so we are implementing a range of programs including completion bonuses, severance packages, accelerated vesting of all RSUs, outplacement support, and in some cases relocation support.

This process will take some time, and I want to reinforce that nothing will begin to change for several months. Helping everyone through this difficult period is a priority, along with staying focused on running the business. We’ll have all of the detailed transition planning done by May 15 and will share more information as soon as possible as we go through the process. If you are directly affected by these changes, by tomorrow you will receive more detailed individual information on the bonuses, severance and benefits you will receive if you stay with the company and help maintain a smooth transition.

We have been fortunate to have had an incredible team of talented and experienced professionals in WC. They built the infrastructure and foundation for launching the company and being able to successfully grow to scale and profitability, and they have always been active partners in shaping the best direction for the business. We have all worked hard alongside each other, and I have a great respect for the WC teams and have developed strong friendships with many. This is a forward-looking decision based on the new and different challenges we will need to overcome in the years ahead, and, there is an overwhelming case that this is the right decision for the long-term growth and success of the company.

Jonathan, David, John and I will be meeting with all of the individuals and teams over the next few days to talk in more detail about why we are doing this and how the transition will work and it means for each of you. We are all always available to answer questions and concerns, so please reach out to me or one of them, and we’ll work hard to keep everyone updated as we go forward.

Best,

Dan