SEOUL (Reuters) - Virgin Mobile USA (VM.N) is set to acquire a U.S. mobile arm of South Koreas SK Telecom Co (017670.KS) as both sides agreed to combine their struggling businesses, the Financial Times reported on Wednesday.
A deal was agreed in principle and an announcement could be made as early as this week, a person with knowledge of the matter was quoted as saying. SK Telecom declined to comment.
SK Telecom, South Koreas top mobile operator, said in May it was in preliminary talks with Virgin Mobile about strategic opportunities for its Helio U.S. arm.
Helio, which has been losing money, is 69 percent owned by SK, with EarthLink Inc (ELNK.O) holding 28 percent.
"Although theres no guarantee that the combined company will succeed, its still a good move as SK Telecom can reduce risks from the U.S. business," said Lee Shi-hoon, an analyst at Hyundai Securities. "Virgin Mobile has a scale and Helio has strong services, so the combination can work."
The FT said the agreement would see Helio injected into Virgin Mobile USA and the Virgin brand will be retained.
SK Telecom has also agreed to invest a nominal sum in Virgin Mobile USA, the newspaper said.
Virgin Mobile, which is partly owned by Richard Bransons Virgin (VA.UL) and Sprint Nextel Corp (S.N), serves more than 5 million customers. It has seen growth slowing amid the U.S. economic slowdown and increased competition from rivals.
A merger between Virgin and Helio could make sense as both target young customers and rent space on Sprints network.
SK Telecom has looked to overseas markets such as China and the United States as expansion becomes more difficult at home where more than 90 percent of Koreans own a mobile phone.
In China, SK Telecom agreed on Monday with Shanghai Media Group, Chinas second-largest media group by revenue, to cooperate in mobile TV, Internet and content businesses.
(Reporting by Rhee So-eui; Editing by Keiron Henderson)
A deal was agreed in principle and an announcement could be made as early as this week, a person with knowledge of the matter was quoted as saying. SK Telecom declined to comment.
SK Telecom, South Koreas top mobile operator, said in May it was in preliminary talks with Virgin Mobile about strategic opportunities for its Helio U.S. arm.
Helio, which has been losing money, is 69 percent owned by SK, with EarthLink Inc (ELNK.O) holding 28 percent.
"Although theres no guarantee that the combined company will succeed, its still a good move as SK Telecom can reduce risks from the U.S. business," said Lee Shi-hoon, an analyst at Hyundai Securities. "Virgin Mobile has a scale and Helio has strong services, so the combination can work."
The FT said the agreement would see Helio injected into Virgin Mobile USA and the Virgin brand will be retained.
SK Telecom has also agreed to invest a nominal sum in Virgin Mobile USA, the newspaper said.
Virgin Mobile, which is partly owned by Richard Bransons Virgin (VA.UL) and Sprint Nextel Corp (S.N), serves more than 5 million customers. It has seen growth slowing amid the U.S. economic slowdown and increased competition from rivals.
A merger between Virgin and Helio could make sense as both target young customers and rent space on Sprints network.
SK Telecom has looked to overseas markets such as China and the United States as expansion becomes more difficult at home where more than 90 percent of Koreans own a mobile phone.
In China, SK Telecom agreed on Monday with Shanghai Media Group, Chinas second-largest media group by revenue, to cooperate in mobile TV, Internet and content businesses.
(Reporting by Rhee So-eui; Editing by Keiron Henderson)
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