Virgin Mobile USA finally made the announcement on Friday that they have bought Helio. The joint venture of SK Telecom and EarthLink will be sold to Virgin for $39 million in common stock. SK Telecom will also get two seats on Virgin’s board of directors. Of course, there still remains the issue of what will happen to the service. So let’s go over the salient points.
Virgin goes postpaid
Right along with the deal announcement, Virgin made it clear that they would be entering into the postpaid market as soon as the deal closed. This is thanks to Helio’s proprietary customer management system, which will allow them to handle a postpaid system. The customer management system also provides for hybrid accounts, meaning we could be seeing even more offerings from Virgin once everything is settled.
With Helio comes its 170,000 customers, which are said to have an ARPU of $80. Funny, wasn’t there something else with Virgin Mobile that cost $80? Oh yeah, their unlimited calling plan
. Maybe we’ll see this available prepaid and
postpaid. It would make sense.
Helio has long been known for their killer handsets. The Ocean is touted as some as better than the iPhone, though most Apple fanboys scoff at that notion. Regardless, it’s a pretty device, and it is certainly superior to anything Virgin currently offers. Thankfully, it sounds like Virigin will be keeping the Helio line, keeping the 170,000 transferring customers happy. Plus, they will be an attractive option for existing customers.
Many of Helio’s data offerings are also coming along for the ride. This mean an integrated version of YouTube, MySpace, Google Maps, and more.
New MVNO agreement
Before the deal became official, Virgin and Sprint revised their network relationship. Virgin claims that this will mean an 8 percent reduction in cost per minute in 2009, with the rates falling even further over a three-year period. “This new volume discount structure allows Virgin Mobile USA additional flexibility in pricing, while substantially reducing the Company’s third-party risk.”
So will they pass the buck to the consumer? One would hope so, considering they put this information right in the press release.
We cover prepaid phones here, not financial analysis. So we’ll keep this section brief. With this deal comes a $25 million investment in Virgin Mobile from SK Telecom, and an additional $25 million from the Virgin Group. This, according to the release, will increase Virgin’s line of revolving credit, allowing them greater flexibility in spending.
Final call: Looking good
We won’t know what’s going to happen with this deal until it closes, which is said to be in the third quarter. From the looks of it, though, there are some major benefits to the merger, as described above.
There are always bad things, though. So, Helio customers, are you satisfied with having your service transferred over to Virgin Mobile?]]>