Virgin Mobile USA on Friday said it has agreed to acquire Helio, a joint venture between SK Telecom and EarthLink, for $39 million in equity.
Strategically, the Helio acquisition allows Virgin to add a set of data applications to its suite of products and services. Entering into the postpaid market will also give Virgin access to about 140 million prospective new customers.
Dan Schulman, CEO of Virgin Mobile USA, characterized Helio as an asset that adds to the companys scale and allows it to reduce network costs.
"This strategic acquisition integrates Virgin Mobile USAs brand recognition, scale and extensive distribution with Helios accomplishments in advanced handset and content offerings," Schulman said. "It provides us with a firm foundation to create a truly holistic, leading-edge product suite to service all of our existing and prospective customers."
VIRGIN ENTERS THE POSTPAID MARKET
With the acquisition, Virgin will gain an established postpaid billing and customer care platform. Virgin expects acquiring Helios 170,000 customers and expanding its portfolio will increase the companys volume. That, the firm said, will drive down the companys cost per minute under an amendment to its Personal Communications Service agreement with Sprint Nextel.
On the consumer side, Helio has made headway on social networking. The company has developed data services in partnership with YouTube, Google and MySpace. Virgin said it will use this to strengthen its competitive position in the prepaid, hybrid and postpaid markets while moving its handsets upmarket.
"With about 20 percent of our disconnects currently going to postpaid products, we believe this new platform will be a powerful retention tool as we offer a unique and desirable postpaid alternative to our customers," Schulman said.
IS THE MVNO MODEL FAILING?
JupiterResearch analyst Michael Gartenberg is somewhat surprised Virgin is buying Helio. The Helio concept was struggling as a high-end Mobile Virtual Network Operator (MVNO) targeting consumers with the least amount of money to spend on expensive phones and expensive monthly services.
"Helio seemed to get away from its initial mention. I guess there was only so much money backers were willing to pump into it before they realized it wasnt working. Its another case of MVNO really not being a great business model," Gartenberg said.
With the demise of so many mobile players over the past 18 months, he continued, mobile companies looking to enter the market should think twice about the MVNO model. It may seem like a strong play to push niche vertical services to mobile consumers, but it turns out that carrier services have a broad-enough appeal to satisfy most users.
"Weve seen signs of Helio stores closing down," Gartenberg said. "That model clearly didnt work, so well have to see what Virgin decides to do with the existing brand, the existing subscribers, and where they plan on taking the stores from here."
Strategically, the Helio acquisition allows Virgin to add a set of data applications to its suite of products and services. Entering into the postpaid market will also give Virgin access to about 140 million prospective new customers.
Dan Schulman, CEO of Virgin Mobile USA, characterized Helio as an asset that adds to the companys scale and allows it to reduce network costs.
"This strategic acquisition integrates Virgin Mobile USAs brand recognition, scale and extensive distribution with Helios accomplishments in advanced handset and content offerings," Schulman said. "It provides us with a firm foundation to create a truly holistic, leading-edge product suite to service all of our existing and prospective customers."
VIRGIN ENTERS THE POSTPAID MARKET
With the acquisition, Virgin will gain an established postpaid billing and customer care platform. Virgin expects acquiring Helios 170,000 customers and expanding its portfolio will increase the companys volume. That, the firm said, will drive down the companys cost per minute under an amendment to its Personal Communications Service agreement with Sprint Nextel.
On the consumer side, Helio has made headway on social networking. The company has developed data services in partnership with YouTube, Google and MySpace. Virgin said it will use this to strengthen its competitive position in the prepaid, hybrid and postpaid markets while moving its handsets upmarket.
"With about 20 percent of our disconnects currently going to postpaid products, we believe this new platform will be a powerful retention tool as we offer a unique and desirable postpaid alternative to our customers," Schulman said.
IS THE MVNO MODEL FAILING?
JupiterResearch analyst Michael Gartenberg is somewhat surprised Virgin is buying Helio. The Helio concept was struggling as a high-end Mobile Virtual Network Operator (MVNO) targeting consumers with the least amount of money to spend on expensive phones and expensive monthly services.
"Helio seemed to get away from its initial mention. I guess there was only so much money backers were willing to pump into it before they realized it wasnt working. Its another case of MVNO really not being a great business model," Gartenberg said.
With the demise of so many mobile players over the past 18 months, he continued, mobile companies looking to enter the market should think twice about the MVNO model. It may seem like a strong play to push niche vertical services to mobile consumers, but it turns out that carrier services have a broad-enough appeal to satisfy most users.
"Weve seen signs of Helio stores closing down," Gartenberg said. "That model clearly didnt work, so well have to see what Virgin decides to do with the existing brand, the existing subscribers, and where they plan on taking the stores from here."
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