Virgin Mobile saw an opportunity and took it, but will the carrier be able to maintain Helio's high ARPU?
Virgin Mobile today announced that it has entered into an agreement to acquire Helio, a joint venture between SK Telecom and EarthLink providing postpaid multimedia phones and services. Under the terms of the agreement, Virgin Mobile USA will acquire Helio from SK Telecom and EarthLink for limited partnership stock, with a value of $39 million based on the closing price of Virgin Mobile USA's class A shares on June 26, 2008.
With an ARPU of approximately $80 and 170,000 existing subscribers, Helio has been able to create a unique high-performing consumer niche within the gigantic American telecom market. That's nothing but an impressive accomplishment, and it'll be interesting to see how well Virgin Mobile will be able to maintain Helio's success.
Helio's real breakthrough came with the Helio Ocean, which was introduced at a time when the Danger-based Sidekick development stalled. Now, Microsoft has acquired Danger and pretty much every other company in the mobile industry is gradually adjusting its services to focus more on social network support and other popular services.
Helio has already responded to this by significantly reducing the price of the Helio Ocean step by step since introduction, but there's no doubt that the rumored Helio Ocean 2's introduction price will have to be significantly lower than the predecessor, which will leave little room for rebates in this market in the future.
As such, Virgin Mobile USA aims to reduce Helio's expenses through handset volume discounts, while a new agreement with Sprint will lead to an 8% reduction in its effective cost per minute in 2009, with further reductions over the next three years. Only time will tell whether that's sufficient to keep head above water in this new niche that all the big ones now are going after.
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