Virgin Mobile USA In Merger Talks With Helio; Other Options Still Being Considered

Virgin Mobile USA In Merger Talks With Helio; Other Options Still Being Considered

Rafat Ali
mocoNews.net
Thursday, May 8, 2008; 8:00 PM

Virgin Mobile USA (NYSE: VM), the MVNO which just reported its Q1 earnings earlier this week, is in talks with the much smaller and troubled MVNO Helio, we have learned, even as other PE and strategic players are still circling both the companies. Helio is now controlled by SK Telecom (NYSE: SKM), after Earthlink (NSDQ: ELNK) stopped making further investments, and has been looking at options to either exit or grow. For VMUSA, as we have mentioned, some PE players have been looking at investing in the company or buying it outright, and even if the VMUSA-Helio deal comes through, the two could use some extra cash.

Under one scenario that has been discussed, SK Telecom would buy out VMUSA and do a cash infusion; then Virgin Mobile would buy Helio in an all-stock transaction. Both of the MVNOs run on the Sprint (NYSE: S) network, so at least both run on the same network. But the merger of two won't solve any problems of scale or distribution for either of them, but at least would give the bigger partner VMUSA a high powered post-paid plan, and better handsets and phone UI.

SKT, South Korea's largest mobile operator, has been looking to expand its operations in U.S. Cyworld USA, SKT's social networking subsidiary here, hasn't done as well as it expected, and we know Helio's troubles. Previous reports have also said that SKT was looking at buying the troubled operator SprintNextel, along with PE firm Providence Equity. Sprint rejected the $5 billion bid.

As for VMUSA, when we asked CEO Dan Schulman to comment on rumors, he told us this earlier in the week: "We don't comment on any rumors out there, but we have said that we believe that there are opportunities for us in terms of non-organic growth, such as another MVNO, or capability set that we might be able to avail ourselves of...Certainly there are a lot of opportunities that we see, and we think some of them are intriguing for us, but it's a matter of what makes the most sense."

Updated: Earnings: Virgin Mobile's Q1 Was Tough; Looking At Opportunities For Growth Virgin Mobile USA: Will Anyone Buy It? SK Telecom To Invest $110M In Online Businesses in US; Includes Cyworld USA; Invests $270M in Helio Helio Shakes Up Execs; Sky Dayton Moves To Chairman; Sull Upped To CEO Sprint Nextel Rejected $5 Billion SK Telecom, Providence Equity Investment With Strings: Report