It's not surprising to hear that merger talks between Virgin Mobile and SK Telecom's Helio have fallen apart and that Helio stores will shut down soon. Back in May, the two MVNOs announced they were in preliminary talks. The two companies, however, have little synergy.
Helio was heavy on content and 3G while targeting higher spending consumers--those willing to pay about $70 per month, while Virgin Mobile has remained focused on the prepaid, credit-challenged youth market, not getting caught up in complex user interfaces and applications. And CEO Dan Schulman has been quite clear that he doesn't want to deviate from this focus.
Moreover, both companies aren't fairing well financially. The last we heard about Helio's financial position was from 2007, when Helio reported it lost $327 million on $171 million of revenue. Meanwhile, Virgin made $4.2 million of profit on $1.3 billion of revenue in 2007, but this year it is struggling with a sagging economy and its stock price. Financial analysts expect the company to lose customers throughout 2008 and face more intense competition in the prepaid arena from large operators. Virgin is in no financial position to buy a money-bleeding MVNO whose business model has no comparison to its own.
What does this all mean? Helio, if it does shut down soon (and I have no doubts that it will), will mark the end of an era. Its demise will be the last of the content-heavy class of MVNOs that included Mobile ESPN, Disney Mobile and Amp'd Mobile. And Virgin will remain the MVNO anomaly that will be a little worse for wear in 2008. --Lynnette [1]
Links:
[1] mailto:lluna@fiercemarkets.com