Earthlink halts funding of Helio

We’ve talked about it a couple of times before: There is a distinct possibility that Earthlink, struggling itself, could sever ties with Helio, its money-devouring MVNO. Helio is forecasted to lose roughly $350 million this year, which is not good for a dial-up Internet company that is restructuring in order to adapt to a broadband world. They’ve taken the first step towards that severance, announcing that they will cease funding the MVNO for the time being. This does not, though, necessarily signal the end for Helio.

Earthlink isn’t the only company in on the Helio venture; SK Telecom, a South Korean telecommunications company, is also a partner. They’re not in a financial bind, so they announced that they will sink another $270 million into Helio. This could move the 50-50 venture more in the favor of SK, though talks are ongoing.

Analysts and industry veterans say it’s hard to buy minutes and data from another carrier and then build a compelling enough service that you can charge a profitable premium.

While it’s tough, we’ve seen some success in the U.S. with Tracfone, and to a lesser extent, Virgin Mobile. However, whenever looking at MVNOs, analysts like to evoke Amp’d Mobile, which failed miserably. They supposedly signed on too many subscribers too quickly, and weren’t able to handle all transactions internally. Helio, however, stands out from Amp’d in that regard. They use SK’s intricate billing system, which allows them to stay on top of things that Amp’d let slip through the cracks.

Many will view this as the beginning of waning days for Helio. However, we feel that SK’s increased involvement will only help the MVNO. Earthlink has their own problems, and the last thing they need is a cell phone company eating up their funds. That brings to light the biggest issue with MVNOs in the U.S.: If they turn a profit, it doesn’t come quickly. Investors must exercise patience, and in Earthlink’s case, patience just isn’t possible. But it is with SK.
[InfoWorld]