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Virgin Mobile USA In Merger Talks With Helio; Other Options Still Being Considered

imageVirgin Mobile USA (NYSE: VM), the MVNO which just reported its Q1 earnings earlier this week, is in talks with the much smaller and troubled MVNO Helio, we have learned, even as other PE and strategic players are still circling both the companies. Helio is now controlled by SK Telecom (NYSE: SKM), after Earthlink (NSDQ: ELNK) stopped making further investments, and has been looking at options to either exit or grow. For VMUSA, as we have mentioned, some PE players have been looking at investing in the company or buying it outright, and even if the VMUSA-Helio deal comes through, the two could use some extra cash.

Under one scenario that has been discussed, SK Telecom would buy out VMUSA and do a cash infusion; then Virgin Mobile would buy Helio in an all-stock transaction. Both of the MVNOs run on the Sprint (NYSE: S) network, so at least both run on the same network. But the merger of two won’t solve any problems of scale or distribution for either of them, but at least would give the bigger partner VMUSA a high powered post-paid plan, and better handsets and phone UI. More after the jump…

SKT,  South Korea’s largest mobile operator, has been looking to expand its operations in U.S. Cyworld USA, SKT’s social networking subsidiary here, hasn’t done as well as it expected, and we know Helio’s troubles. Previous reports have also said that SKT was looking at buying the troubled operator SprintNextel, along with PE firm Providence Equity. Sprint rejected the $5 billion bid.

As for VMUSA, when we asked CEO Dan Schulman to comment on rumors, he told us this earlier in the week: “We don’t comment on any rumors out there, but we have said that we believe that there are opportunities for us in terms of non-organic growth, such as another MVNO, or capability set that we might be able to avail ourselves of…Certainly there are a lot of opportunities that we see, and we think some of them are intriguing for us, but it’s a matter of what makes the most sense.”

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Rafat Ali
@rafatali May 8, 2008 1:30 PM ET
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Posted In: Money, M&A & Venture Capital, Mergers & Acquisitions, Exclusive, Companies, Helio, Virgin, Virgin Mobile

  • manny

    i've had helio for 2 years now, started with the kickflip, which i loved. now on the ocean, in the past year since i've had it all i've noticed is disappointment.

    first, the lady over the phone said "FOR ANY REASON YOU ARENT SATISFIED, RETURN THE PHONE WITHIN 30 DAYS"

    and i said "even if i don't like the phone cuz it's ugly?"

    and she said "total happiness guarantee, so even if it's ugly, return it for a full refund"

    went through that hassle after trying to return it for a week speaking to 3 different managers, only to be told no.  now within the last month, i've received about 20 dropped calls, that's 20 more than i've ever gotten with helio.

    at this point, i'm basically gonna call it quits on helio since it seems like it's calling it quits on us. 1

  • Adam

    Time WILL tell. Let's keep our ears open to the RIGHT channels.

  • Sherri

    Helio had better wake up and realize that they are losing so many customers because of their inept billing and customer service (which has gone from really bad to horrific since moving their call centers overseas). The Ocean was a nice little device, but other than that, I have nothing positive to say about Helio.

  • zack

    Helio is so gay I had it 4 a wile and I left it with in like 3 to 4 months the service was was I droped calles all the time

  • brad

    i work for helio and havent heard anything about a merger. i hope not. i love helio.

  • keith

    I agree competely with Mike.  SK Telecom needs to wake up, stop wasting money, and better understand the US market.  MVNOs are not what will work.  There are too many disadvantages in the states with that structure. 

    The best option I think for SK Telecom is to buy a smaller US entity who owns infrastructure and licenses such as Leap Wireless.  That would be killer.

  • I have been following Helio, ever since the idea was conceived and am not surprised at its current state. I was a professor in Korea those days and tried my hard to give SK Telecom some sense on why convergence does'nt work. SK Telecom has had some success with mobile data on their on home turf and wanted to replicate that in the US. Unfortunately MVNO is a different story and the US is not their own home turf. NTT DoCoMo has also experienced that - i-mode has not succeeded in other countries anywhere close to what it did in Japan. Infact the success of i-mode in Japan is more of a perceived one - Tens of thousands of i-mode sites including mobile mail contribute only 25% to ARPU, the rest being contributed by voice.

    I don't foresee Helio succeeding in the current form in the US. What SK Telecom must realize is

    1. Mobile downloads from Internet is a very small business in countries that have appreciable fixed broadband penetration
    2. The use of convergence at the application level is not ingrained in the human psyche. It might change over thousand years
    3. Human subconscience drives adoption and its understanding is critical to the marketing success of high technology services

    In my most recent research I have studied the adoption dynamics of high technology services and have used the conscienc-subconscience model to explain the varying patterns. I have also used this study to design successful "go to market" strategies for mobile data services and Mobile TV.

    I would be happy to share the outcomes of my study with the readers and can be contacted on mikegauba@gmail.com

  • Kevin

    Yeah Amp'd never merged but they did try to convice Verizon to buy em out before the bankruptcy. Amp'd was 100% omptimistic even after the bankruptcy and even the day before the bankruptcy. I was part of the cellairis project for Amp'd Mobile to help open 300+ stores for Amp'd Mobile and even the day before they knew they were filing bankruptcy we told them we were going to push for another 30 stores to be open in that June month that they filed. How messed up is that to not even tell you that they are filing and have to read about it. Same thing with Helio. Sk finally realizes that they are just fishing money away everday Helio keeps its doors open and why do you think Virgin wants to sell its Virgin Mobile because they realize the same thing, So Virgin is going to buy controlling stakes of Helio Stock after the merger, wow what a financial relief that is for Sk telecom. Nothing but trouble for the future, and the sad thing about this is is that I am a Helio dealer.

  • Ruh

    And thats why they went bye-bye.

  • Tom

    Amp'd never merged with another MVNO.

  • Kevin

    Is this the end of Helio…. Looking more like Ampd every day

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