Helio Merger Talks Confirmed
Mobile service reseller Virgin Mobile USA on Wednesday confirmed reports that it is in talks with South Korea’s SK Telecom about a strategic deal involving Helio, SK’s high-end U.S. mobile service reseller.
The parties are seeking a deal that could alter the fortunes of both Virgin Mobile and Helio, two firms that have faced tough times financially in the disappointing mobile virtual network operator, or MVNO, business.
Confirmation of the talks between SK Telecom and Virgin Mobile about a possible merger of the two MVNOs sent Virgin Mobile’s stock soaring more than 20 percent.
Both Helio and Virgin are jointly owned by SK Telecom and EarthLink. Virgin Mobile, which resells services from Sprint Nextel, went public in May 2007.
Virgin Mobile targets pre-paid phone service customers with relatively inexpensive service plans, while Helio aims at the youth market with more expensive services and high-end phones.
Helio and Virgin Mobile make a very bad match,†said Alex Besen, president of The Besen Group. Certainly a merger does not make sense either financially or operationally for either company, but particularly so for Virgin.â€
The main goal of a merger of the two firms, he said, would involve the migration of many of Virgin’s five million customers to post-paid plans and would offer them enhanced services marketed by Helio.
Kajeet is a Bethesda, Maryland, MVNO, which began reselling Sprint mobile services in March 2007 aimed at “tweens,” young people between 12 and 14 years old.
Mr. Besen believes that Virgin, which has had problems adding new subscribers, should target attractive, rapidly growing cultural niches in the U.S. market such as Hispanics.
He said that Virgin, which woos Hispanics, should have at least investigated the purchase of Movida Communications, a Kansas City, Missouri-based MVNO which targets the U.S. Hispanic market.
Movida, which was backed by Sprint a Venezuelan conglomerate and a group of former Sprint executives, filed for Chapter 11 bankruptcy in March.
Cozac Wireless, a subsidiary of APC Wireless of Rockville, Maryland, bought Movida for $2.8 million in April.
Virgin will not get the benefits of scale with Helio that it will get from Kajeet, Movida or some of the other players targeting cost-conscious consumers,†Mr. Besen said.
Topics: Earthlink, Virgin Mobile, Sk Telecom, MVNO, Sprint Nextel, Movida, Cassimir Medford, Alex Besen, Kajeet, Cozac Wireless.
