Feeds

Virgin Mobile USA to buy hipster operator Helio

Can the cool survive?

Website security in corporate America

In a union of hipster-friendly mobile operators, Virgin Mobile USA has agreed to purchase Helio for $39m in stock.

Virgin Mobile offers low-cost, pre-paid services to the hip set, and now, it can give them something a little different: high-end subscription setups on phones with names like Ocean, Heat, and Drift.

"This strategic acquisition integrates Virgin Mobile USA's brand recognition, scale and extensive distribution with Helio's accomplishments in advanced handset and content offerings," reads a canned statement from Virgin Mobile USA boss Dan Schulman. "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."

According to Schulman, 20 per cent of the hipsters that abandon their pre-paid Virgin Mobile plans opt for post-paid contract plans, and he's sure that Helio can stem the flow. "We believe this new platform will be a powerful retention tool as we offer a unique and desirable postpaid alternative to our customers."

Helio is a joint venture between EarthLink and South Korean behemoth SK Telecom. Schulman and crew have agreed to give the two companies 13 million shares of Virgin Mobile USA stock, which had a value of roughly $39m when the bell rang yesterday afternoon.

As part of the deal, SK Telecom and Virgin Group, Virgin Mobile USA's parent company, will each provide a $25m dowry for this marriage of hip mobile brands. In return, SK Telecom gets a 17 per cent stake in the new combined operation.

Virgin has 5.1 million mobile customers in the US, and with the Helio acquisition, it will grab another 170,000. And these are much bigger spenders. According to Helio, it's average revenue per user (ARPU) is $80 a month, and in an interview with the Dow Jones New Service, Schulman said those 170,000 Helio customers are the equivalent of 700,000 pre-paid customers.

Both Virgin and Helio rent their US wireless bandwidth from Sprint Nextel. Today, Virgin also announced a new deal with Sprint that ties its cost per wireless minute to volume of network traffic it generates. The company believes that in adding Helio customers, it will reduce its cost per minute by 8 per cent in 2009, saving roughly $30m.

The new operation will need every penny. In the tightening US market, life is increasingly difficult for MVNOs (mobile virtual network operators) - outfits like Virgin and Helio who rent their bandwidth from spectrum holders. In 2006, Disney killed its ESPN Mobile Service after 11 months of life and $30m in loses, and last summer, it buried Disney Mobile after little more than a year.

With its pre-paid plans, Virgin has amassed a sizable customer base. But margins are thin, and the company is struggling to enlist new users. Net customer additions fell 94 per cent in the first quarter. Meanwhile, Helio is raking in some serious dough per customer, but those customers are relatively few.

The hope is that a combined operation can avoid the Disney jinx. ®

Internet Security Threat Report 2014

More from The Register

next story
Brit telcos warn Scots that voting Yes could lead to HEFTY bills
BT and Co: Independence vote likely to mean 'increased costs'
Phones 4u slips into administration after EE cuts ties with Brit mobe retailer
More than 5,500 jobs could be axed if rescue mission fails
ISPs' post-net-neutrality world is built on 'bribes' says Tim Berners-Lee
Father of the worldwide web is extremely peeved over pay-per-packet-type plans
New 'Cosmos' browser surfs the net by TXT alone
No data plan? No WiFi? No worries ... except sluggish download speed
Radio hams can encrypt, in emergencies, says Ofcom
Consultation promises new spectrum and hints at relaxed licence conditions
Google+ GOING, GOING ... ? Newbie Gmailers no longer forced into mandatory ID slurp
Mountain View distances itself from lame 'network thingy'
Blockbuster book lays out the first 20 years of the Smartphone Wars
Symbian's David Wood bares all. Not for the faint hearted
Bonking with Apple has POUNDED mobe operators' wallets
... into submission. Weve squeals, ditches payment plans
prev story

Whitepapers

Secure remote control for conventional and virtual desktops
Balancing user privacy and privileged access, in accordance with compliance frameworks and legislation. Evaluating any potential remote control choice.
WIN a very cool portable ZX Spectrum
Win a one-off portable Spectrum built by legendary hardware hacker Ben Heck
Storage capacity and performance optimization at Mizuno USA
Mizuno USA turn to Tegile storage technology to solve both their SAN and backup issues.
High Performance for All
While HPC is not new, it has traditionally been seen as a specialist area – is it now geared up to meet more mainstream requirements?
The next step in data security
With recent increased privacy concerns and computers becoming more powerful, the chance of hackers being able to crack smaller-sized RSA keys increases.