UPDATED: Virgin Mobile launches mobile data promotion with 500 MB free for first month

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Sprint Nextel's (NYSE:S) prepaid brand Virgin Mobile will offer one free month of data to low-end data users in a bid to attract new customers, a company spokeswoman confirmed. The Virgin promotion, first pointed out by the research firm Current Analysis, was launched Nov. 1.

The promotion is different from and not a response to Verizon Wireless' (NYSE:VZ) more expansive promotion to double the data allotments for LTE smartphone customers, but points to signs of ferment in the mobile broadband market ahead of the holiday season.

Virgin Mobile spokeswoman Beth Evegan confirmed to FierceWireless that new customers who purchase and activate a Virgin Mobile Broadband2Go device (MiFi or USB modem) are eligible to receive up to 500 MB of data for free during their first month of service (Virgin charges $20 per month for 500 MB of data). Customers have until Nov. 15 to purchase a MiFi or USB device, and until Dec. 12 to activate service to be eligible for the promotion. The ZTE Peel, which offers EV-DO connectivity for Apple's iPod touch, is not eligible for the promotional offer and the promotion only applies to new users.

"Virgin Mobile Broadband2Go is offering this promotion as we head into the holiday shopping season," Evegan said. "Virgin Mobile is helping customers stay connected whether they're shopping online or traveling for the holidays and want to stay in touch with family and friends." Virgin also offers a $10/100 MB 10-day plan and a $50/2.5 GB monthly plan (users who surpass those thresholds will have their download speeds slowed).

Current Analysis analyst Deepa Karthikeyan took a mainly negative view on the Virgin promotion "because while it may attract attention from those who may have considered the carrier's offerings in the past, it will do little to enhance the overall appeal of its broadband portfolio, which compares unfavorably to offerings from Tier 1 carriers. Moreover, the promotion is only limited to new users, which might anger existing subscribers. To top this, Virgin Mobile continues to price its aged devices high (the Ovation MC760 USB device costs $79.99 and the MiFi 2200 hotspot costs $149.99) and its native Sprint 3G footprint with no roaming might hold back some users."

Credit Suisse analyst Jonathan Chaplin wrote in a research note that Verizon's smartphone promotion is worrisome for all other carriers. He said that, Sprint, which recently capped mobile WiMAX usage for mobile broadband devices such as hotspots and USB modems, now is at a disadvantage (Sprint still offers unlimited WiMAX on smartphones). "Verizon now offers a more compelling value for a 4G network that is faster and has better coverage," he said.

Chaplin also said that because AT&T Mobility's (NYSE:T) LTE coverage lags Verizon's, it will have a difficult time competing, even if it were to try a promotion similar to Verizon's. "AT&T might face fairly meaningful ARPU pressure if they offered similar plans across their HSPA+ and LTE networks (certainly more ARPU pressure than Verizon)," he wrote. "T-Mobile is the worst positioned, with no LTE network and no way to respond without cannibalizing ARPU."

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Correction, Nov. 10, 2011: This article originally did not include the fact that Virgin's promotion started Nov. 1, ahead of Verizon's promotion and not in response to it. This article also originally incorrectly stated that Virgin's $10 Broadband2Go plan is a daily plan; it is for 10 days.