updated 11:10 am EDT, Fri June 27, 2008
Virgin Mobile Buys Helio
Virgin Mobile today shook up the American wireless business with news that it would acquire Helio for $39 million in share equity, merging the latter into Virgin's mobile virtual network operator (MVNO) business. The deal also has Virgin absorbing some of Helio's debt and also gives the carrier Helio's 170,000 customers in the US, with the latter ending its brand in the US. The deal should be completed during the summer pending US government approval, according to the two companies.
The move significantly grows Virgin's influence in the US but is said by the provider to be more significant for its change to Virgin's phone strategy. The acquisition gives the normally prepay-only carrier stronger access to subscription (postpay) plans and also lets it introduce EVDO data plans that have generally been off-limits to Virgin, which focuses chiefly on basic text and media messaging.
Features from Helio's phones such as Google Maps with GPS and YouTube access should carry over along with the phones themselves, according to the company. The features will let the firm boost its average income per user from its currently very low amounts to between $40 and $70 per month.
Creating a larger company will also give Virgin better phone rates and drop the company's own costs by eight percent with more reductions to come. These also aren't tied to Sprint's own rates any longer and let the newly expanded company compete much more effectively, Virgin says.
The deal scales back Korea-based SK Telecom's forays into the US cellular market. The company invested heavily into Helio along with American partner Earthlink with hopes of making inroads into the West, but has struggled as customers opted for existing offerings from Sprint (which supplies Virgin's airtime), AT&T, and other incumbent carriers. SKT will still own a 17 percent stake in the resulting merged company and will have two seats on the board of directors.