Virgin Mobile bought Helio Friday for $39 million , but Virgin isnt throwing the small, high-end cell phone carriers technology away. Instead, Virgin Mobile plans to integrate Helios data services into their own offerings, Virgin Mobile USA CEO Dan Schulman said in a conference call Friday.
"Starting to take those advanced data applications that Helio has and moving them into the rest of our base is really the natural evolution of our product market," Schulman said.
Virgin Mobile acquired Helio from South Koreas SK Telecom and Earthlink in a complicated transaction involving $39 million in stock and a $50 million cash infusion by SK Telecom and Virgin Group. SK now owns 17% of Virgin Mobile USA. Earthlink will own 2.7% of the new company and Helios charismatic founder, Sky Dayton, will not be involved in the new firm, Helio spokeswoman Jayne Wallace said.
The merger lets prepaid carrier Virgin expand into the subscription, or "postpaid" market, and gives them advanced technology platforms that would otherwise cost $25 million to build, Schulman said.
"We are substantially increasing our size, scope and growth potential ... getting an inventory of highly sophisticated and desirable handsets ... and we accelerate our time to market by at least one year," he said.
While the Helio name will go away except in a few cases, Shulman said, Helios 170,000 subscribers dont need to worry - theyll be able to keep their phones, plans, and Helio services. The new carrier will combine Virgins scale, financial common sense and low prices with Helios data services and advanced phone options, Schulman said.
Beyond that, technical details were hard to come by, though. Theres no word yet on whether Virgin will adopt Helios attractive Danger-designed user interface, or whether Virgin will toss out the popular Java applications system for Helios unique and incompatible WIPI C.
Virgin and Helio have a lot in common. They both use Sprints network, though Shulman revealed that Virgin gets a much better deal from Sprint than Helio got. Their phones are compatible. And they both targeted young users - though Virgin has historically gone for basic, voice-only users, while Helio aimed at the high-end social-networking crowd.
"Our target market remains the same, the youth market," Schulman said, "The youth market has evolved."
Merging will let Virgin Mobile achieve savings based on its size, Schulman said. For instance, because the one new company makes more calls on Sprint, theyre amending their agreement with Sprint to effectively lower their wholesale rates by 8% in 2009. That will enable Virgin to offer Helio-like services for $40-70/month rather than the $80 or more that most Helio subscribers pay, he said. Virgin and Helio also use the same distributor, Brightpoint, and similar call-center strategies, which will let the company find more savings.
"The key to success, in a word, is scale. It wasnt until we got up to three or four million customers that we knew we were going to have a successful, profitable business going forward ... at the end of the day, if you cant get to scale, youre not going to make it in this business," Schulman said.
Virgin Mobile launched in July 2002 and now has about 5 million customers. They specialize in inexpensive phones, prepaid plans and youth-oriented mobile content. Helio launched in May 2006 with a promise to bring advanced Asian technology to US consumers, but ended up being a mobile-social-networking focused carrier who gave a prominent role to MySpace on their phones.
The Virgin conference call also provided a peek into Helios disastrous finances. With only 170,000 customers, they had 570 employees and 1250 retail locations, Schulman said. Helio had 4-5% churn, the rate of subscribers leaving each quarter. By contrast, Virgin Mobile, which has 5 million customers, only has 450 employees. And Sprint, which analysts criticize for high churn, only had 2.45% churn during the first quarter of 2008.
Virgin will cut Helio down to 200 employees and 250 stores, and aims to increase postpaid subscriptions by 150,000 over the next year, Shulman said.
"Starting to take those advanced data applications that Helio has and moving them into the rest of our base is really the natural evolution of our product market," Schulman said.
Virgin Mobile acquired Helio from South Koreas SK Telecom and Earthlink in a complicated transaction involving $39 million in stock and a $50 million cash infusion by SK Telecom and Virgin Group. SK now owns 17% of Virgin Mobile USA. Earthlink will own 2.7% of the new company and Helios charismatic founder, Sky Dayton, will not be involved in the new firm, Helio spokeswoman Jayne Wallace said.
The merger lets prepaid carrier Virgin expand into the subscription, or "postpaid" market, and gives them advanced technology platforms that would otherwise cost $25 million to build, Schulman said.
"We are substantially increasing our size, scope and growth potential ... getting an inventory of highly sophisticated and desirable handsets ... and we accelerate our time to market by at least one year," he said.
While the Helio name will go away except in a few cases, Shulman said, Helios 170,000 subscribers dont need to worry - theyll be able to keep their phones, plans, and Helio services. The new carrier will combine Virgins scale, financial common sense and low prices with Helios data services and advanced phone options, Schulman said.
Beyond that, technical details were hard to come by, though. Theres no word yet on whether Virgin will adopt Helios attractive Danger-designed user interface, or whether Virgin will toss out the popular Java applications system for Helios unique and incompatible WIPI C.
Virgin and Helio have a lot in common. They both use Sprints network, though Shulman revealed that Virgin gets a much better deal from Sprint than Helio got. Their phones are compatible. And they both targeted young users - though Virgin has historically gone for basic, voice-only users, while Helio aimed at the high-end social-networking crowd.
"Our target market remains the same, the youth market," Schulman said, "The youth market has evolved."
Merging will let Virgin Mobile achieve savings based on its size, Schulman said. For instance, because the one new company makes more calls on Sprint, theyre amending their agreement with Sprint to effectively lower their wholesale rates by 8% in 2009. That will enable Virgin to offer Helio-like services for $40-70/month rather than the $80 or more that most Helio subscribers pay, he said. Virgin and Helio also use the same distributor, Brightpoint, and similar call-center strategies, which will let the company find more savings.
"The key to success, in a word, is scale. It wasnt until we got up to three or four million customers that we knew we were going to have a successful, profitable business going forward ... at the end of the day, if you cant get to scale, youre not going to make it in this business," Schulman said.
Virgin Mobile launched in July 2002 and now has about 5 million customers. They specialize in inexpensive phones, prepaid plans and youth-oriented mobile content. Helio launched in May 2006 with a promise to bring advanced Asian technology to US consumers, but ended up being a mobile-social-networking focused carrier who gave a prominent role to MySpace on their phones.
The Virgin conference call also provided a peek into Helios disastrous finances. With only 170,000 customers, they had 570 employees and 1250 retail locations, Schulman said. Helio had 4-5% churn, the rate of subscribers leaving each quarter. By contrast, Virgin Mobile, which has 5 million customers, only has 450 employees. And Sprint, which analysts criticize for high churn, only had 2.45% churn during the first quarter of 2008.
Virgin will cut Helio down to 200 employees and 250 stores, and aims to increase postpaid subscriptions by 150,000 over the next year, Shulman said.
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