Virgin Mobile's Helio Buy Will Bring Youth-Focused Services

HelioMarketing plans to communicate Virgin Mobile USA's acquisition of SK Telecom's U.S. mobile unit Helio may seem a bit fuzzy today, but expect the acquired youth-focused services to serve as fodder for future messaging to attract new business. 

Virgin Mobile's $39 million stock deal announced Friday, which should close between July and September, will give customers location-based GPS services and direct connections to Google's YouTube and News Corp.'s MySpace.

Consumers should see Helio's advanced data platform and features integrated into Virgin Mobile handsets beginning in 2009. The plan aims to complement existing services such as the Sugar Mama program, which lets people earn free minutes in exchange for viewing advertising content online.

Virgin Mobile USA CEO Dan Schulman told investors and analysts that the company intends to target the approximately 140 million postpaid customers who spend between $40 and $70 monthly. "About 20% of disconnects go to post-paid services and in order to retain our highest-value customers we need a full suite of services," he added.



Spending on average $80 per month for voice and data services, Helio's 170,000 customers are considered among the industry's most valuable, although many bailed for rivals earlier this year.

Although Helio's mobile phones--manufactured in part by Samsung--sold through select big-box retailer Fry's Electronics and mom-and-pop outlets, Jan Dawson, an analyst at research firm Ovum, says the mobile provider lacked the storefronts and at the least, the retail distribution network telecom companies need to thrive.

Helio's marketing and advertising efforts focused on word of mouth and online, along with billboards in major cities like New York and San Francisco. "There was little television advertising and a lot relied on word of mouth," Dawson says. "They weren't spending anything on advertising compared with the big players."

Similar to Virgin Mobile, Helio is a mobile virtual network operator--a service provider without its own network. The company runs on the back of Sprint's network, like Virgin Mobile, but Sir Richard Branson's company, one of about 200 under the Virgin brand, has the infrastructure and the distribution network that SK Telecom's MVNO never had.

Dawson says the deal strengthens Virgin Mobile's position in the market and provides services to consumers that the company would have spent millions to build from scratch. In fact, Virgin Mobile's Schulman says the company estimates it would take a year to build the technology platform at a cost of $25 million.

Virgin Mobile serves more than 5 million customers, but growth has been slowing from a weak U.S. economy and competition from rivals AT&T Mobility and Verizon Wireless. The acquisition will allow Virgin Mobile to gain more favorable network rates that are no longer tied to Sprint's costs, but rather revenue from minutes, messaging and megabytes pushed across the Sprint network. Another benefit: a $2.50 network use credit for each customer added beginning on July 1, with a cap on $10 million, Schulman says.

South Korea's SK Telecom, as well as Virgin Group, which jointly owns Virgin Mobile with Sprint Nextel, will also each invest $25 million of equity capital in the company.

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