Virgin Mobile Buys Helio for $39 Million

Virgin Mobile has announced it has entered into a deal to acquire upscale, youth-oriented MVNO Helio for some $39 million. The announcement follows weeks of speculation that a deal was imminent between the two companies. At the same time, billionaire Richard Branson’s Virgin Group and South Korea’s SK Telecom (which was the majority owner of Helio) have announced they will each invest $25 million in Virgin Mobile, while in turn will give SK Telecom a 17 percent stake in Virgin Mobile.

“This strategic acquisition integrates Virgin Mobile USA’s brand recognition, scale and extensive distribution with Helio’s accomplishments in advanced handset and content offerings,” said Virgin Mobile CEO Dan Schulman in a statement. “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.”

Virgin indicated it intends to keep operating Helio’s advanced data service plans and subscription packages; Helio’s customers pay an average of about $80 per month for services, and were one of the first mobile operators to introduce location-based services, phone blogging, and mobile access to YouTube to the U.S. mobile market. In contrast, Virgin Mobile’s phones are all pre-paid and handled without contracts.

Helio focused on bringing high-tech cell phones from South Korea to the U.S. market, and integrating them with services designed to appeal to technologically hip, younger consumers. However, Helio’s subscriber base has been dropping—170,000 compared to 200,000 at the beginning of the year—and the company has been struggling to compete with the iPhone as well as ever-more-affordable smartphones. In contrast, Virgin Mobile has about 5.5 million users—making it the largest MVNO in the U.S.—but experiences significant customer churn, and recently revealed it expects to lose between 130,000 and 160,000 subscribers this quarter alone.

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