FT: Virgin Mobile close to deal with SK over Helio
Apparently confirming earlier reports that the two sides were at the bargaining table, the Financial Times reports that the two companies are very close to a deal.
According to a Financial Times update this afternoon, a deal has been agreed to "in principle" for Virgin Mobile to acquire the Helio-branded operations of Korea-based SK Telecom. An announcement could come as early as the end of this week.
New shares of the company would be issued, according to the report, with Virgin as the new majority shareholder, SK retaining a 20 percent share in the new company, and the stronger Virgin Mobile brand being used for the combined business.
The writing may have been on the wall for over a year now, with EarthLink looking to shed itself of ventures outside of its core Internet services business. In September, that company announced that SK Telecom had agreed to start funding the mobile company.
What isn't known presently is how the deal affects EarthLink's share -- it currently holds about 28 percent of Helio.
Regardless, it highlights the risk-laden nature of the so-called "mobile virtual network operator" (MVNO) business. To date, there has yet to be a single carrier which has managed to make an appreciable amount of money off of it.
Disney tried twice with its Disney and ESPN Mobile services -- neither succeeded and both have since stopped service. Virgin Mobile is arguably the best positioned of these providers, and has overall done the best financially.
Analysts say that the two companies could be a good match for each other. Helio has a strong line of services that could be attractive to consumers, while Virgin Mobile has the strong business model.
Virgin is a owned by Richard Branson's Virgin Group and uses Sprint's CDMA network to provide services to its five million customers. Helio was also using Sprint's towers to provide service to its users as well, though it only served about 200,000 customers.
With slowing in the wireless industry overall, consolidation -- or at least talk of it -- has become the story du jour. Deutsche Telekom has been rumored to be considering a Sprint Nextel bid, while Verizon and Alltel recently announced their own merger.