mocoNews news watch | Helio

Meet Europe's (And The U.S.'s?) Newest Mobile Operator: China Telecom

2012-01-04T13:19:38Z

China presents one of the single biggest opportunities for mobile companies looking for more growth, and it’s no surprise that companies like Apple are doubling down on their investments there. But similarly, Chinese mobile players are looking at ways of exporting their products and playing on their brands abroad, and it’s not just device makers like Huawei and ZTE leading the charge. The latest: state operator China Telecom, which today announced a new consumer mobile service in the UK, its first outside the mainland.

China Telecom will be starting a new mobile service as an MVNO in partnership with Everything Everywhere, the joint venture between France Telecom’s Orange and Deutsche Telekom’s T-Mobile in the UK. That means that while China Telecom will operate the service, including all customer and billing management, it will be doing so on network infrastucture owned by the two UK operators.

According to the FT, this will be only the beginning: China Telecom’s subsidiary China Telecom Europe is understood to also be looking to launch similar services in France and Germany; and is also looking for a similar MVNO launch in the U.S., where it already has a deal for business customers with AT&T (NYSE: T)—although in wireless the two work on different networks.

For Everything Everywhere, the deal is another signal of how the JV is looking to beef up its wholesale offerings at a time when the UK retail market remains competitive: In October Everything Everywhere reported that it had 27.5 million customers, a decline of 1.4 percent on the year before but still representing a growth in revenues and the more lucrative contract subscriber base. The operator now has 24 MVNOs on its network.

The China Telecom MVNO, due to launch sometime in Q1 2012, will very much play on China Telecom’s brand recognition among Chinese living and visiting the UK, who will be the first target customers for the service. China Telecom is China’s biggest fixed-line operator, with just under 170 million subscribers, as of November 2011. In mobile it reported 123.4 million subscribers, making it the third largest behind China Mobile and China Unicom, but still among the very biggest in the world.

With that in mind, the idea of targeting only Chinese residents and visitors in the UK and the rest of Europe makes this a small-scale venture—almost too small for a company the likes of China Telecom. There are only an estimated two million Chinese living in Europe, with 600,000 of them in the UK. My guess: given the much larger scale that China Telecom normally works at, it’s likely that if this MNVO takes off, we might see a broader offering and marketing effort for the service.

It will be worth seeing how China Telecom faces up to the MVNO challenge. There are plenty out there already that are thriving, but they do so on a very low cost base because the margins can be very slim. Those MVNOs that have tried to enter the market with a costly splash—remember Disney (NYSE: DIS) and Helio?—have not fared as well.

China’s mobile market has thrived around new services related to mobile content, particularly since many use their phones rather than PCs to access the web. It will be worth watching how and if this comes into play, too—or whether this will simply be about cheap calls back home.

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Mobile Bytes: iPad 2; BlackBerry PlayBook; Helio Class-Action

2010-12-07T14:47:04Z

—iPad 2: The iPad 2 will start getting shipped by manufacturer Foxconn Electronics in late February 2011, according to reports from Taiwanese component makers. The device had originally been expected to ship in January but got held up by tests being done to the device’s firmware. The sources say Foxconn shipped about six million iPads in Q3 of 2010; with Apple (NSDQ: AAPL) announcing it had sold 4.18 million units in that quarter, that means there were about 1.8 million units of inventory carried over to the fourth quarter. (via Digitimes)

—PlayBook: Gearing up for the launch of its tablet device, RIM (NSDQ: RIMM) today said is now accepting PlayBook apps on its BlackBerry App World app store. To motivate developers, RIM is offering free PlayBooks to all developers who submit and get their apps approved before the device launches in North America. The actual launch date, and therefore the deadline for the offer, has yet to be confirmed but the U.S. release is roughly scheduled for the early part of 2011.

—Helio: Remember Helio, the MVNO that was acquired by Virgin Mobile USA (NYSE: VM) in 2008 (now Sprint) and then shut down as a separate brand? If you were one of its 170,000 customers you may be eligible for a refund if you paid an early termination fee to leave the service: apparently the operator was over-charging ETF customers and there is now a class-action suit underway to recover the money. (via IntoMobile)

SK Telecom May Re-Enter The U.S. Market With Investment In LightSquared

2010-09-20T17:55:05Z

The biggest impediment to getting Hedge Fund Manager Philip Falcone’s wireless company getting off the ground is money, but he may be seeing some traction on that front. LightSquared has reportedly obtained a four-year loan worth $750 million from UBS AG, and separately, SK Telecom (NYSE: SKM), which has wanted to enter the U.S. market for years, has confirmed it is in talks with the company.

The idea is to use satellites to roll out wireless broadband services to 260 million U.S. residents by 2015. The company would compete directly against Clearwire’s WiMax network, and 4G networks being built out by AT&T (NYSE: T) and Verizon Wireless. Harbinger’s Falcone, who got rich by out-smarting the subprime housing bubble, has already committed billions of dollars to the venture starting off when he bought SkyTerra for roughly $500 million. In July, the venture said it had obtained $1.75 billion in initial funding commitments.

Bloomberg reports that the loan from Zurich-based UBS is secured by assets and subsidiaries of LightSquared. Falcone needs $5 billion to build the network, according to an estimate from Oppenheimer & Co. analyst Tim Horan. Another injection could come from SK Telecom, the top carrier in South Korea. A spokeswoman for the company confirmed to Bloomberg that it was “in talks with Harbinger to decide investment terms.” SK Telecom had previously tried to enter the U.S. market when it invested in Helio.

Both UBS and LightSquared declined to comment about the additional financing.

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SK Telecom Backs Out Of U.S. By Selling Virgin Mobile Stake To Sprint

2009-07-30T01:03:52Z

SK Telecom (NYSE: SKM) had such big aspirations for the U.S., and now it looks like all its efforts are for nothing.

SK Telecom’s entrance into the U.S. kicked off with a bang a few years back with Helio, a joint venture with Earthlink (NSDQ: ELNK). The South Korean telecom operator sunk hundreds of millions of dollars into that venture, only to sell the company to Virgin Mobile USA (NYSE: VM) a year ago for a paltry $39 million. This week, it’s exit is far from spectacular. The company has agreed to sell its entire 15.3 percent stake in Virgin to Sprint (NYSE: S) for much less than a fortune.

Yesterday, Sprint Nextel agreed to acquire Virgin for $483 million. SK Telecom spokeswoman Lauren Kim told the WSJ that the company’s stake in Virgin Mobile would be diluted to below 1 percent following Sprint’s acquisition. “This means there is no strategic value for us so SK Telecom has decided to sell the entire stake when market conditions are favorable.”

According to AFP, the percentage will be closer to half a percentage at .53 percent. It’s unknown how much SK Telekom will make for its stake because the sale price and timing hasn’t been set yet, Kim said.

But considering that Sprint’s trading at around $4 a share, it probably won’t be anything close to what SK Telecom has invested in the U.S. over the last few years.

Pre-Paid Price Wars Call For Consolidation; Who's Next?

2009-07-06T22:06:11Z

The recent introduction of a $45 unlimited calling and texting plan by Tracfone Wireless has kicked off another round of price wars in the wireless industry, which may lead to consolidation in the pre-paid market, Dow Jones Newswires reports.

In recent months, pre-paid offerings have gotten more popular as they have become cheaper and don’t require a credit check or lengthy service contract. Likewise, carriers have looked to them as a way to lure subscribers away from each other with really aggressive offerings. This has gotten more important as the pool of people without cellphones has dwindled in the U.S. But with prices falling and margins deteriorating, analysts question whether these companies can continue to be profitable and how long they can stand on their own?

Tracfone’s Straight Talk, which runs on the Verizon Wireless (NYSE: VZ) network, competes directly with other pre-paid players such as Sprint’s Boost Mobile, Leap Wireless International, MetroPCS Communications and Virgin Mobile USA (NYSE: VM). The $45 Tracfone offering is five dollars cheaper than Sprint’s pre-paid service Boost Mobile’s unlimited $50 offer, which became so popular this year that Sprint (NYSE: S) had to increase the network’s text-messaging capacity to handy the spike in volumes.

The players say that they aren’t just competing on price and are better for one reason or another—wider selection of phones, or specialty offerings, such as MetroPCS’s $5 international calling plan.

Tracfone is considered the largest pre-paid provider with roughly 12 million customers, but still questions remain as to whether they can make money off of its new plan. “We doubt it,” said William Power, an analyst at Robert W. Baird. The severe competition may just lead to consolidation. Last year, Virgin bought Helio ~~Amp’d Mobile~~ to beef up its higher-end pre-paid offerings. But after that, the two most likely candidates are MetroPCS and Leap, which both cover regional territories, and have been rumored to be in and out of talks for years. But who knows?

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Virgin Mobile USA's CEO Says Over Half The Population Is Considering Prepaid

2009-05-11T18:07:13Z

Virgin Mobile (NYSE: VM) USA’s CEO Dan Schulman (pictured, right) has a front row seat to the latest trend in the wireless industry—a move by the mass market to adopt aggressively priced prepaid unlimited offers.

Schulman said prepaid interest has heightened recently as prices have fallen and perceptions have changed about the offering. Instead of it being the “poor cousin,” Schulman said cheap is chic and it has become a legitimate alternative in consumer’s minds. In fact, Virgin’s own market research has found that “well over the half of the population is willing to actively consider prepaid,” which represents an increase of more than 1,000 basis points over the past six months.

Prepaid adoption can easily be tracked through the growth of four major U.S. prepaid providers, which all are offering a $50 unlimited plan of some kind (See chart after the jump.). Last week, Boost Mobile, a Sprint (NYSE: S) subsidiary, added a jaw-dropping 764,000 subscribers and regional providers, Leap and Metro PCS, both reported year-over-year growth of more than 40 percent. Of the three, Virgin reported today that it actually lost subscribers during the first quarter, but said new pricing plans introduced during the tail-end of the period will make the company more competitive going forward. Together, the four providers represent an impressive 19.1 million subscribers.

In an interview with mocoNews, Schulman explained there’s two major forces behind this trend, and offered his perspective on how he believes the prepaid and postpaid markets will shake out in the near future.

His thoughts after the jump…

The economy and pricing is driving this trend: “Two things have absolutely occurred. The economy has made people much more cognizant on what they are spending, and prepaid over the years has gotten much more aggressive as opposed to postpaid. Although [prepaid] was growing slightly, it wasn’t growing a lot..If you can get postpaid, it was the way most people went.” Schulman also believes that even if the economy recovers, consumers will continue to be frugal. “Given the severity of what people have gone through…I think the memory of what occurred will last with consumers for quite some time to come.”

The role of prepaid and postpaid operators: Schulman said two camps are forming in the wireless industry. In his opinion, he sees the postpaid market going forward as a place where people will seek a phone subsidy, an iconic device, like the iPhone; or heavy data usage. But if you are primarily into making phone calls, and simple messaging, like sending text and emails, prepaid is good enough for you. “If that’s what you are primarily into, then prepaid has become a better deal than postpaid. From a per minute perspective, if you line up our suite vs. postpaid, we pretty much are better at every minute level now.”

Photo Credits: Above, Schulman: Reuters; In Graph: Randy Son Of Robert

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South Korea's SK Telecom Looking To US And China For New Investments

2009-04-09T11:16:44Z

SK Telecom (NYSE: SKM), South Korea’s dominant mobile carrier, is on the look out for new business, with $2.2 billion at its disposal over the next five years to find and invest in them, Reuters reports. With its home market saturated, and with the telco facing stagnate revenue growth, SK said it would hunt out new technology and services, and would look overseas—including the US and China—for growth opportunities. Jung didn’t go into too many specifics, but said that SK was looking at next-generation networks and cross-industry convergence.

SK Telecom’s last venture into the US mobile market—its Helio MVNO joint venture with Earthlink—didn’t pan out so well. After a three year struggle to gain customers, and hundreds of millions of dollars of investment poured into the start-up, SK Telecom sold Helio last year to Virgin Mobile USA (NYSE: VM) for $39 million in equity. It now holds a 17 percent stake in VMUSA. The Korean telco also has a small stake in Chinese carrier China Unicom and has made investment in other Chinese mobile companies, including content ones.

South Korea is considered one of the most advanced mobile markets in the world, and one of its most saturated. Some 95 percent of the population has a mobile phone, while 92 percent of households have broadband access. SK also told the news wire that it was testing Nokia (NYSE: NOK) mobile phones to launch in South Korea.

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Is T-Mobile USA Entering The $50-A-Month Voice Plan War?

2009-03-04T01:09:38Z

T-Mobile USA launched a trial in San Francisco two weeks ago that allowed customers to sign-up for unlimited voice for $50 a month, but now there’s evidence that it is quickly expanding the offer to more customers nationwide. Ironically, it was RCR Wireless News, which shut down today, that first reported the move. The publication reported that staff at RCR was able to sign up for the offer in two different locations, and that it appears any customer in any location who has been with T-Mobile USA for 22 months or longer can sign up for the promotion. T-Mobile is not providing any more details, but said in an official statement: “We are offering select customers pricing plans that reward their loyalty to T-Mobile. We do not comment on pricing policy for competitive reasons.”

It wasn’t very long ago when carriers started offering unlimited voice plans for $100 a month, but a slew of regional players and MVNOs over the last year, have been putting additional price pressure on the four major carriers to discount rates even more. Recently, Boost Mobile, the MVNO running on Sprint’s smaller Nextel network, started offering a $50 plan that includes unlimited voice, texting, Web access and push-to-talk services. That matches other regional players such as MetroPCS and Leap, which offer plans for $45 to $50, but are limited geographically. Virgin Mobile USA (NYSE: VM), which runs on the Sprint (NYSE: S) network, offers an $80 unlimited plan. RCR points out that T-Mobile is pairing its $50 unlimited voice plan with a $35 unlimited text and data plan for a total of $85 a month, which matches a similar data plan being offered for the T-Mobile G1.

It’s hard to understand why T-Mobile is headed in this direction because it seems like it would cannibalize revenues from two of its flagship services: the company’s HotSpot@Home service, which offers unlimited calling over Wi-Fi, and its MyFaves program, which offers unlimited calling to five of your favorite people. Each costs more money, but often requires a minimum voice plan of about $50 to qualify. Why would customers sign up for either service if they had an unlimited voice plan for $50 a month? Perhaps, T-Mobile has retention problems. In Q4, it said churn jumped to 2.4 percent, among contract holders, from 1.8 percent in the same period a year earlier. One reason for the higher churn? “Competitive intensity,” the company said. Sort of gives new meaning to the company’s slogan: “Stick Together.”

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Virgin Mobile's Ocean 2 Is No Show-Stopper

2009-02-03T17:48:56Z

It doesn’t have a big screen, it’s not touch sensitive and it is even slow at times, but if it’s price you are concerned about, Helio’s Ocean 2, just unveiled by Virgin Mobile (NYSE: VM), may offer some relief. Yesterday, Virgin Mobile USA unveiled the second-generation Helio device, the first Helio phone since the two companies merged last year. With the merger completed, Virgin Mobile now has the benefit of being able to offer a wide range of products. Before, they were focused on the low-end pre-paid market. With Helio, they’ll be able to offer higher-end, data-driven products—but in the same playful, youth-oriented manner. The Ocean 2 accomplishes that (every key tapped and button pushed results in a beep or chime). It’s not a polished and sleek iPhone, and it’s definitely not a workhorse Blackberry, but the phone makes it easy to monitor the favorite social networks, and offers a wide variety of content, including games, video, web surfing and messaging. Release.

The interesting part is that this phone is technically a feature phone because it doesn’t have an smartphone operating system, but it’s highly functional, and even beats the iPhone and T-Mobile G1 in some categories, while even having a couple of features that will be available in the soon to-be-released Palm (NSDQ: PALM) Pre. It’s not always a fast ride, but from the home screen, users can search the Web and pull up contacts (without even a search bar), and the social networks are integrated into the device with just one click. The Web browser is not a full browser, but it does a good job of rendering most sites, and allows you to have multiple pages open at the same time. It also allows you to sync with Microsoft (NSDQ: MSFT) exchange and a slew of other email providers, it has GPS-enabled Google (NSDQ: GOOG) Maps, it has 3G and comes with 2 gigabytes of internal storage and a 2 megapixel camera capable of shooting video. The phone costs $149, and monthly plans start at $65, which includes 500 daytime minutes and unlimited messaging and data. That’s where it may beat out the iPhone, which costs $200, but is nearly $100 a month for even fewer minutes. For unlimited everything, the Ocean 2 maxes out at $99.

Here’s a video of some of the features mentioned above:

Price Wars: Boost Mobile Unveils Unlimited Voice And Data Plan For $50

2009-01-15T06:14:28Z

Boost Mobile, the MVNO running on Sprint’s smaller Nextel network, is offering the most aggressive national unlimited plan yet—for $50, customers will get an unlimited voice, texting, Web access and push-to-talk services, AP reports. The kicker is that it is available without a contract. Other regional players such as MetroPCS and Leap offer plans that cost about $45 to $50, but are limited geographically. Most nationwide carriers offer unlimited plans for $100 a month, and Virgin Mobile USA (NYSE: VM), which runs on the Sprint (NYSE: S) network, offers an $80 unlimited plan. The new pricing beats Boost’s cheapest plan by $20.

It’s likely that Boost, which is a wholly owned subsidiary of Sprint’s, is feeling pressure from its parent to perform since Sprint has had a hard time recruiting and retaining customers. In recent weeks, Sprint has provided additional incentive to Virgin Mobile to add more subscribers. Boost had 3.9 million customers at the end of Q3, and Virgin Mobile had 5.38 million at the end of the year. Matt Carter, Boost’s president, told AP the offer could appeal to even the higher-end postpaid subscribers who want to save money and don’t mind the small range of handsets or don’t want premium services such as streaming video or music downloads. At the same time, Virgin Mobile, which was focused exclusively on the pre-paid market, is moving upstream with the purchase of Helio.

How The Big Mobile Stories Of 2008 Will Play Out In The New Year

2008-12-29T12:00:46Z

This year was somewhat an anomaly for the wireless industry. A lot of things got done: the impossible of mergers closed; new phones launched that hold the promise of significant industry change; new business and distribution models emerged; and higher-speed networks were more prevalent, making for a better user experience. The industry does tend to move quickly, but the number of big events in 2008 seems staggering. Because of this, I wanted to provide a look back at some of the biggest mobile headlines of the year, and project forward as to what these deals and companies will have to do to remain relevant in the new year. In a lot of ways, the deals may have been done, and the products and services may have gotten out of the gate, but 2009 will be a year of execution.

2008 Olympics in Beijing: The worldwide Olympic games were considered the biggest example of a digital event, where content would be available en masse on the three screens: mobile, online and TV. The event was largely a success with NBC reporting surprising mobile traffic, and others seeing customers experiment with new content for the first time.

—Looking forward: The big question is whether these one-time users, who logged in for an addictive event like the Olympics, will continue to come back to the mobile phone for events with less significance. Already there’s predictions that massive numbers of people will turn to their phones for history-making events, such as the president-elect’s Barack Obama’s inauguration, but it will be more important to see an uptick for other major sporting and political events.

More after the jump on the App Store, Virgin-Helio, and other topics…

iPhone 3G and App Store: In July, Apple (NSDQ: AAPL) launched the iPhone 3G, while simultaneously launching the iTunes App store, which provided developers more direct access to consumers than ever before. The App store has encouraged a number of copycats that will be launched in the new year. As of early December, the App store had 10,000 apps, and there had been 300 million downloads.

—Looking forward: In order for the the App store and others to be relevant in coming months, they will have to provide a profitable business for developers and other companies in the ecosystem. One easy gauge of success will be whether a company making iPhone apps is acquired. Well, we don’t need to wait until next year to see that process starting. We saw one of the first sales a couple weeks ago. (German application developer FutureTap bought Where To, an application that lets users find points of interest around them using their iPhone’s GPS, from fellow iPhone developer Tap Tap Tap for $70,000). Others should follow.

Virgin Mobile (NYSE: VM) USA-Helio Merger: Earlier in the year, we reported first that this tie-up was likely to happen, and it turned out to be true. Publicly held Virgin Mobile worked together with Helio’s majority shareholder SK Telecom (NYSE: SKM) to craft a merger that would help Virgin succeed. The deal even includes support from Sprint (NYSE: S) Nextel, which has incentive to see the carrier do well since it’s piggy-backing on its network.

—Looking forward: So many MVNOs have not worked out. In 2009, Virgin Mobile will have to figure out the business model that works, but may have the additional benefit of being able to leverage the poor economy as people hesitate to sign long-term contracts with the major operators. Also, as an outcome of the merger, Virgin took over Helio’s content and development division, which wasn’t previously an area of focus for the budget-minded carrier. In 2009, we’ll closely watch Virgin’s transition into becoming a carrier that also caters to higher-end handsets with more data and services. While it may be able to rely on its lower-end subscribers, graduating to higher-end services, it will also be competing head on with the major U.S. carriers.

Clearwire-Sprint merger: After two tries, Clearwire (NSDQ: CLWR) finally completed a partnership with Sprint’s WiMax division. Clearwire will be responsible for building and operating a WiMax network, while Sprint will continue to own a substantial stake in the company. The deal included $3.2 billion in funding from Google (NSDQ: GOOG), Intel (NSDQ: INTC), Comcast (NSDQ: CMCSA), Time Warner (NYSE: TWX) and Bright house Communications.

—Looking forward: There are so many moving parts in this deal. Clearwire is up against a clock. It must roll out in as many markets as it can to beat its competitors, which have picked a competing standard. It will also face dwindling cash reserves and a tough economy. In early January, Clearwire will launch its first true WiMax network in Portland, Ore., and will have to stick to a rapid build-out schedule, while being strict on spending cash. It will also be marketing a new product—mobile Internet—to the mass market. To remain a going concern, it will have to convince Wall Street that it’s sitting on a huge opportunity. Good luck: This is how companies fail—or are made.

Google releases Android, and launches its first phone: Google delivered its first phone, the T-Mobile G1, built by HTC and sold by T-Mobile. While it is not clear how well it is doing, HTC says it will sell more than one million by the end of the year.

—Looking forward: In order for Android to be successful, it will have to sell tens of millions of devices, not just one million, built by one handset maker, sold by one carrier. The competition is intensifying with Apple and RIM (NSDQ: RIMM). Look for devices to be sold by Samsung, Huawei and Motorola (NYSE: MOT) in 2009. Ultimately, it may be the developers who decide which platforms succeed, and it is still unclear how successful the Android Market will be. To date, it has only distributed free applications, but that will change in the new year as Google opens it up to application sales. Interestingly, the revenues will be split by developers and carriers, unlike the model used by the Apple’s App store, which shares none with the carrier.

Sprint Nextel launches the Simply Everything Plan: It was rumored that Sprint was going to offer a $100 unlimited voice plan, but in the end, the struggling carrier offered voice plus data and services like navigation all for that $100 price. All the other carriers hopped on board, offering $99 unlimited voice plans, with only some including text messaging for free.

—Looking forward: Sprint is losing customers at such a rapid rate, it may yet offer an even more compelling plan. Still, the promotion seems like a flop at this point, as Sprint is not winning over new customers. Look for more marketing campaigns from Sprint to increase the hype in 2009.

Nokia (NYSE: NOK) buys Symbian and makes it open source: Nokia is undertaking one of the largest open-source endeavors ever, by paying $410 million to buy the remaining shares of Symbian that it did not already own and then turning the assets into a foundation that provides open-source software to developers and handset makers.

—Looking forward: In 2008, Symbian was on target to surpass 200 million cumulative sales since its inception 10 years ago. According to Canalys, it was the the leading operating-system smartphone market for the past year as of Q1 and had about 60 percent market share (with Linux having 12 percent; Microsoft (NSDQ: MSFT) (NSDQ: MSFT, 11 percent; RIM 11 percent; and Apple 2 percent). Clearly, the move was defensive, with competitors such as Linux and Google’s Android starting to ramp up, and others not charging a license fee. Timing will be everything, but it won’t be a 2009 event. By the first half of 2010, the foundation expects to release its first software version, which may be too late given that several more Android handsets will be out and maybe even Microsoft will have a new Windows Mobile version out.

Nokia Comes With Music: This was definitely one of the most anticipated events of 2008. Nokia launched its first handset that included unlimited downloads for a year that users were allowed to keep for life from the four major music labels, representing millions of tracks.

—Looking forward: The service in the end was a bit disappointing because it was inherently not mobile. Users could download all the music they wanted on their computer, and then tether their phone to the computer to transfer the music. It is not changing consumer habits. In 2009, Nokia will have to make this service more mobile. That may require Nokia to create a partnerships and possibly a rev-share arrangement with a carrier. The companies will have to be creative in order for each partner to continue to make money. Think advertising. If successful, the model could spread to other niches, like games.

Sprint Will Pay Virgin Mobile USA More For Each Subscriber It Adds

2008-12-24T19:50:02Z

Virgin Mobile USA (NYSE: VM) will now get paid $4.50 for each subscriber it signs on to the Sprint Nextel network between July 1, 2008 and Dec. 31, 2009, reports the Kansas City Star, referencing a document filed with the SEC. Previously, Sprint paid Virgin $2.50 per subscriber, up to a total of $10 million, but the new deal shows just how desperate Sprint is to stop losing customers. The concept of Sprint paying Virgin for each customer it added arose when Virgin bought Helio, the youth-oriented MVNO, and used the event to renegotiate more favorable terms with Sprint (NYSE: S). At the end of Sept., Virgin had 5.2 million customers, and Sprint had just above 50 million, but has lost millions this year. Virgin also pays Sprint for its wireless network services. Previously, it agreed to pay at least $320 million in 2008, $370 million in 2009, and $420 million in 2010, but the 2008 payment will drop to $318 million.

How the Helio Buyout Process Went: Virgin Mobile Wanted To Bring In a Retail and Financial Investor

2008-12-12T01:50:55Z

Virgin Mobile USA bought Helio earlier this year, for a paltry $39 million in equity and getting $50 million in investment from British parent Virgin Group and SK Telecom (NYSE: SKM). That we reported on in detail at that time. Now finally, VMUSA has filed details of how the sale process started and the proceedings during the negotiations, in an SEC proxy filing earlier today.

The process started in January this year, when SKT and Earthlink (NSDQ: ELNK), the join owner of Helio, contacted Virgin Mobile USA (NYSE: VM). As the talks progressed, Virgin wanted to bring in one of its major retail partners as an investors, and though it does not disclose the name of the retail partner it considered, it is one of Best Buy, RadioShack, Target, or Wal-Mart (NYSE: WMT), and my guess is Best Buy, only because it is known for investing in such ventures, as it did with Amp’d Mobile. It also wanted to bring in a financial investor. Those plans fell by the wayside during the talks, and the final structure was hammered out and announced on June 27th.

And interesting aside: Virgin had Bear Stearns as its banker first, but as the big bank fell to the credit crisis, it had to scramble to retain Deutsche Bank midway through the process. Montgomery & Co. was the banker for Helio, SK Telecom and EarthLink combine.

The relevant portion of the filing is pasted after the jump

Background of the Transaction
In January 2008, representatives of SK Telecom and EarthLink contacted Dan Schulman, the Company’s Chief Executive Officer, about strategic opportunities regarding the Company and Helio. The Company and Helio entered into a confidentiality agreement on January 24, 2008 concerning a commercial relationship and possible transaction between the parties. At the ensuing regularly scheduled meeting of the Company’s Board of Directors, held February 12, 2008, David Messenger, Chief Administrative & Corporate Development Officer of the Company, discussed a proposed transaction with the Board of Directors.

On February 15, 2008, Mr. Schulman met with Sung Won Suh, Executive Vice President, Global Strategy and Investment of SK Telecom, and Sky Dayton, Chairman of the Board of Helio, at the Company’s Warren, New Jersey headquarters and discussed a possible combination transaction in greater detail. The following week, on February 21, 2008, Mr. Messenger and John Feehan, Chief Financial Officer of the Company, met with representatives of Helio and SK Telecom management in Los Angeles, California to assess Helio’s recent performance and three-year business plan, and to obtain information relating to Helio’s data services, handset development and technical platforms.

On February 29, 2008, in a meeting at Company headquarters among Messrs. Schulman, Messenger, and Peter Lurie, General Counsel of the Company, and representatives of Helio, Inc., SK Telecom and EarthLink, the parties continued discussions and entered into a new confidentiality agreement regarding a possible transaction involving each of the parties. The parties thereafter commenced their respective due diligence reviews and began negotiating the terms of a definitive purchase agreement and related agreements. Concurrently with these negotiations, executives of the respective parties continued to engage in ongoing conversations relating to data sharing by the parties. In March 2008, the Company engaged Simpson, Thacher & Bartlett LLP as its legal advisor for the transaction.
Messrs. Schulman, Feehan and Messenger met with representatives of SK Telecom, EarthLink and Helio at the annual convention of Cellular Telephone Industry Association (CTIA) in Las Vegas, Nevada held during the first week of April 2008 to discuss different proposals relating to deal structure, consideration and the potential inclusion of additional parties to the negotiations. The following week, on April 9 and 10, 2008, Company executives met with Helio and EarthLink executives in Los Angeles. Bear Stearns, as financial advisor to the Company, and Montgomery & Co., as financial advisor to Helio, SK Telecom and EarthLink, participated in the meetings, which concerned ongoing diligence efforts, the technical platforms of the respective parties, potential deal terms and future growth opportunities. On April 14, 2008, the parties met to discuss the contemplated transaction and potential retailer arrangements with representatives of one of the Company’s key retail partners.
On April 17, 2008, at a special meeting of the Company’s Board of Directors held by teleconference, Messrs. Schulman, Messenger and Lurie provided the Board of Directors with an overview of the proposed transaction. In his presentation, Mr. Schulman examined the Company’s competitive environment and position, the valuation of Helio, strategic alternatives to the transaction and integration risks. Mr. Messenger discussed the proposed transaction in detail, offering an overview of Helio’s mobile voice and data services, financial situation and operating metrics, and noting possible opportunities a business combination would offer the Company. Mr. Messenger also reviewed advantages and disadvantages of expanding the scope of the deal to include one of the Company’s retail partners and an investment fund. Mr. Lurie discussed the transaction structure and the regulatory approval process. After an involved discussion in which the members of the Board of Directors thoroughly discussed the details of the proposed transaction, valuation, strategic alternatives and integration plans and risks, the Board of Directors agreed to consider the transaction further and reconvene to discuss valuation and the possible addition of the Virgin Group, as the Company’s major stockholder, to the deal structure. On the same day, legal advisors from SK Telecom, Helio and the Company met to discuss transaction structure and the proposed purchase agreement.

On April 18, 2008, representatives of SK Telecom met in London, England with Robert Samuelson, a Director of the Company and representative of the Virgin Group, to discuss possible terms for joint investment by SK Telecom and the Virgin Group in a combined company, in addition to options relating to the Company’s corporate structure after the acquisition of Helio and investment by SK Telecom and the Virgin Group.

The Board reconvened over the weekend of April 20, 2008 and reviewed extensive business and financial modeling presented by Messrs. Schulman and Messenger. In the course of an involved discussion of the opportunities and risks presented by the proposed transaction, Mr. Schulman noted that the success of the transaction would depend, in part, on the revision of the terms of the Company’s Amended and Restated PCS Services Agreement with Sprint (NYSE: S) Nextel to allow the Company to offer postpaid services. Based on the discussions, the Board unanimously agreed to proceed with negotiations to acquire Helio, subject to an appropriate analysis of the risks posed by any transaction to the Company and its shareholders.

Representatives of SK Telecom and the Virgin Group met again in the company of their respective financial advisors on April 21 and April 22, 2008 to continue discussions, and on April 24, 2008, the Board of Directors of SK Telecom reviewed the proposed terms.

Beginning on April 25, 2008, representatives of the Company began meeting with representatives of various additional parties to discuss their possible inclusion as investors in the combined company. These discussions, which continued until the beginning of June, included representatives of the Company, Helio, the Virgin Group, SK Telecom, EarthLink, one of the Company’s retail partners and an investment fund.

On April 25, 2008, the Company contacted Deutsche Bank Securities, Inc. (“Deutsche Bank”) to discuss retaining Deutsche Bank as its new financial advisor for the transaction in light of the developments at Bear Stearns at that time. The Company subsequently engaged Deutsche Bank as its financial advisor pursuant to an engagement letter dated April 28, 2008. On April 28, 2008, the Board held a special meeting to which representatives of Deutsche Bank were invited and at which Messrs. Schulman and Messenger reviewed the state of negotiations, the strategic objectives of the contemplated negotiations and alternatives to its completion. The Board concurred that the Company would benefit from adding Helio’s ability to offer postpaid services and agreed that the Company should (i) meet with lenders under the Company’s existing amended and restated credit agreement among the Operating Partnership, the Lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent, dated as of July 19, 2006 (as amended, supplemented and otherwise modified from time to time, the “Senior Credit Agreement”) and existing subordinated credit agreement among the Operating Partnership and the Lenders party thereto, dated as of July 19, 2006 (the “Revolving Credit Facility”) to negotiate more favorable terms based upon the expected outcome of the proposed transaction and (ii) continue the discussions with a key retail partner of the Company.

On May 13, 2008, representatives of SK Telecom publicly denied any negotiations between SK Telecom and the Company. In order to correct the record and appropriately inform investors, each of SK Telecom and the Company issued a press release the following day acknowledging that discussions between the Company and SK Telecom relating to possible strategic opportunities were taking place.
The Board revisited the transaction on May 15, 2008 at its regularly scheduled meeting following the Company’s Annual Meeting of Stockholders. Mr. Messenger and representatives of Deutsche Bank updated the Board of Directors on the status of all ongoing negotiations (i) among SK Telecom, EarthLink and the Company relating to Helio, (ii) among the Company and its lenders under the Senior Credit Agreement and Revolving Credit Facility, (iii) between the Company and Sprint in regard to the terms of the PCS Services Agreement, and (iv) between the Company and a key retail partner. The Board of Directors authorized further negotiations in each regard, and considered strategic alternatives in each case.

Negotiations to expand the deal structure and terms to include one of the Company’s retail partners and another investment fund were abandoned at the beginning of June. Negotiations with SK Telecom, EarthLink and Helio continued over the course of the following weeks, including a meeting on June 3, 2008 between Messrs. Schulman and Messenger and representatives of SK Telecom at Deutsche Bank’s offices in New York City. Having reached agreement in principle on key terms, on June 9, 2008 the Company commenced discussions with its lenders in regard to obtaining lender consents to the contemplated transactions. The following day, Company management reported to a special meeting of the Company’s Board of Directors that agreement had been reached among the parties as to the terms of a proposed transaction. The parties agreed to mitigate consequent integration risks by having Helio agree to adhere to a previously proposed transitional business plan that would reduce its operating costs prior to closing and substantially increase accretion for stockholders. Representatives of Deutsche Bank presented their financial analysis with respect to the proposed transaction and noted that, based upon the financial information made available to them, the proposed transaction would be accretive to the Company stockholders.

Over the course of the following week, consents to the transaction were obtained from a majority of the Company’s lenders, SK Telecom agreed (concomitant to the contemplated combination transaction) to join as a lender and the Virgin Group agreed to increase its commitment under the Revolving Credit Facility. As a result, the Company would have access to additional funds under the Revolving Credit Facility and improve its projected performance relative to certain financial covenants under the Senior Credit Agreement. Agreement was also reached with each of SK Telecom and the Virgin Group to secure additional investments of $25 million each in exchange for shares of Series A Preferred Stock. These funds would be used to retire a portion of the debt outstanding under the Senior Credit Agreement, reducing the Company’s leverage and improving its projected performance relative to certain financial covenants in that agreement. Management reported these developments to the Board of Directors at a special meeting convened for such purposes on June 18, 2008, and the Board of Directors agreed to review the final terms of the transaction and reconvene the following week.

On June 25, 2008, Deutsche Bank reviewed with our Board of Directors its financial analysis of the proposed transaction and the Board of Directors appointed a special transaction committee to review and, if advisable, approve the acquisition and related transactions. The special transaction committee met on June 27, 2008 and, after receiving an oral opinion, which was based on and subject to various factors and assumptions stated therein, from Deutsche Bank, which was subsequently confirmed by delivery of a written opinion, dated June 27, 2008, as to the fairness, from a financial point of view, to us as of such date of the consideration to be paid by us and the Operating Partnership in the transaction, and reviewing the final proposed terms, approved the contemplated transactions.”

Mobile Content Bits: Vodafone Artist Discovery; Handango; Virgin Mobile Apps; iPhone Copy & Paste

2008-12-11T20:28:25Z

—Vodafone (NYSE: VOD) Partners With MTV On Artist Discovery: Vodafone has launched a new four-week promotion called Fast-Track that asks unsigned bands and artists to compete for an opportunity to record a single and music video that will be aired on MTV. Interested musicians from 26 eligible countries are encouraged to upload their track to Vodafone’s Soundbites site with photos and biographies over the next four weeks. Voting will begin Jan. 7 when MTV will open online voting to pare the selection down to 20. The final winner will then be chosen by “industry experts including well known music executives.” Release.

—Handando Apps For Sale In Best Buy Stores: Smartphone app retailer Handango has expanded its distribution deal with Best Buy nationwide, after rolling out the partnership in five test markets earlier this year. Handango’s catalog of applications for smartphones can now be purchased with some devices at the point of sale in Best Buy’s store using the big-box retailer’s Mobile Genie system. Sales representatives will also help customers download a Best Buy-branded version of Handango’s In-Hand client to give customers a direct link to more purchases down the line. Some Best Buy stores will also offer customers some application bundles on micro SD cards that include games for Windows Mobile, BlackBerry and Palm (NSDQ: PALM) devices. Release.

—Virgin Mobile USA (NYSE: VM) Expands Storefront: Virgin Mobile USA is continuing to expand the number of applications available on its deck through a new deal with Exclaim, which will help the MVNO launch a MyApps portfolio. The applications, which will be available under the MyApps Infotainment Community section, will include MyHoroscope, MyLovesigns and MyFaith. MyApps is available for $3 a month. Release.

—iPhone Copy-And-Paste, Sort of: A developer user has found a way to copy and paste text from Safari to Mail, and between web pages on the iPhone, Gizmodo reports. The service, called Pastebud, makes use of javascript bookmarks and web services to make it work and get around the fact that the iPhone doesn’t offer copy and paste, yet. Pastebud’s creator said he’s putting the final touches on the service.

Virgin Mobile USA Cuts 10 Percent Of Staff

2008-11-17T17:49:30Z

Virgin Mobile USA (NYSE: VM) said today it’s laying off about 45 employees in its New Jersey and California offices, which represents about 10 percent of the overall workforce. It now will have about 400 employees on payroll. In a memo sent to employees today, Virgin’s CEO Dan Schulman explained that the company was able to identify places where they were able to cut because of the company’s transition of IT services to IBM and through the acquisition of Helio. The Warren, New Jersey-based company reported third-quarter financial results, easily beating expectations. Schulman: “Our intent is to expand our investment in both our prepaid and new postpaid business and, in order to do so profitably, we must continue to identify opportunities to reduce operating costs across all areas…Virgin Mobile USA is well positioned to weather these tough times and build our business in 2009.”

Earnings Call: Helio Lifts Virgin Mobile's Q3 Results; Cutting Edge Services Coming

2008-11-11T01:44:00Z

Virgin Mobile USA (NYSE: VM) reported stronger than expected financial results today, helped by a series of actions that took place following the company’s acquisition of Helio. It wasn’t so much Helio’s customers and it definitely wasn’t the company’s distribution system that benefited the company, but the deal allowed Virgin Mobile to renegotiate its contract with its network provider Sprint (NYSE: S) Nextel, and was able to raise $25 million in funding from SK Telekom and Virgin Group, which lowered the company’s debt. Dan Schulman, Virgin Mobile USA’s CEO, talked about how the acquisition both hurt and helped the company’s Q3 performance. Here’s excerpts from the company’s conference call today and an interview with Schulmann:

Release | Earnings Call | Transcript (via Seeking Alpha)

Helio’s financial results: When Virgin Mobile completed the purchase of Helio, it had 170,000 subscribers, but they lost 5,000 during the third-quarter, which negatively affected the company’s net customer additions. However, Helio, which typically has higher paying post-paid customers, had a positive impact on ARPU (average revenue per user), which grew to $20.19 in Q3. Helio also contributed about $800,000 of EBITDA in Q3, but that was after Virgin Mobile rationalized costs, which included closing all of Helio’s stores and kiosks, and reducing headcount from 600 to 190. Now Helio’s customers will be profitable over the long-term.

Helio’s data services team is driving Virgin Mobile’s innovation: In addition to providing Virgin Mobile a higher-end postpaid product that they can offer to customers, it is also driving the company’s innovation going forward. Schulman: “Our strategy was take this fantastic platform that SK and Helio built and combine that with our strong distribution partnerships and our operational discipline.” Helio’s data service team is now Virgin Mobile’s team. “We are keeping a lot of it because a lot of it is cutting edge. You’ll see some new stuff that is coming out, and we’ve kept the full team on data application and technology side of the business to support it. We have a whole pipeline of new services…I don’t want to give any of them away now, but there’s a couple of them that they’ve been working on and had in the works that I’m quite excited about, and now we are getting them out to market sooner than they would have.”

The economy will impact the migration from low-end handsets to mid-tier phones: Schulman: “We’ve seen a migration to the mid-tier and higher-tier phones. It used to be that 75 percent to 80 percent of our gross ads were on low end phones, but that’s dropped to under 50 percent….But you are also going to see tension in the market right now. Because of the severe environment that consumers are facing, they may need to buy less expensive phones now. I think we are only entering into a deep and long recession, and it may have implications for purchasing going forward.”

Earnings: Virgin Mobile USA Beats Expectations; Stock Rises

2008-11-10T21:57:25Z

Virgin Mobile USA (NYSE: VM) reported its Q3 financial results today, which is the first period that includes results from Helio, the struggling MVNO that the company bought from EarthLink and SK Telecom (NYSE: SKM) in August. The company easily beat its expectations in the quarter, by reporting net service revenues of $305 million, adjusted EBITDA of $27.5 million and a net customer loss of 3,267 subscribers. The company had been forecasting net service revenues of up to $295 million, adjusted EBITDA of up to $24 million, and net adds, ranging between a 20,000 loss and a 20,000 gain. VMUSA’s CEO Dan Schulman said: “Our business performed well in the third quarter. We were able to increase gross customer additions by 8 percent year over year, while our continued operational discipline allowed us to once again overperform in Adjusted EBITDA, growing by 61 percent versus Q3 2007 and improving our Adjusted EBITDA margin by 330 basis points.” In after hours trading, the company’s stock jumped 24 cents or 25 percent to $1.20 a share.

Release | Earnings Call | Transcript (via Seeking Alpha)

Other highlights after the jump

—Economic impacts: VMUSA’s net service revenue for the first nine months of 2008 was $900.2 million, dropping 4 percent from $933.5 million in the same period in 2007. Net service revenue for Q3 and the first nine months were impacted by the economy, as well as usage trends toward lower cost alternatives such as text messaging.

—Net income: Virgin Mobile USA’s net income for the quarter was $4.1 million, compared to a net loss of $7.4 million for the year-ago period. Net income for Q3 included minority interest expense of $4.4 million, which did not exist in the comparable period in 2007.

—ARPU and Churn: At the end of Q3, the company had 5.2 million customers, a 6 percent increase over the year-ago period reflecting the purchase of Helio. Churn in Q3 was 5.5 percent, compared with 4.9 percent in the same period in 2007. Average revenue per user (ARPU) in Q3 was $20.19, reflecting a 2 percent decline from the prior year’s third quarter and an increase of 5 percent sequentially. ARPU benefited from the launch of the hybrid plans and the new higher cost plans as well as the Helio acquisition.

—New products launched: In Q3, the company closed acquisition of Helio, launched the Shuttle, their first EV-DO phone with integrated Helio data services, and rolled out new service plans, and was able to increase hybrid customers to 47 percent of gross customer additions.

—Outlook: In Q4, the company expects net adds in the range of 60,000 to 100,000; net service revenues in the range of $310 - $320 million; adjusted EBITDA between $105 and $130 million, excluding about $15 million of one-time costs associated with Helio and the transition to IBM IT outsourcing. For the full year, adjusted earnings per share for the full year is expected to be between 3 cents and 7 cents a share, including the costs associated with Helio and IBM.

Earnings: SK Telecom Profit Plunges 57 Percent; Books Loss From Helio Sale

2008-10-28T10:46:54Z

Korean operator SK Telecom (NYSE: SKM) reported third quarter net income plunged 57 percent to 333.6 billion won ($225 million), from sales of 2.9 trillion won. Profit missed analyst expectations, which had been forecasted to reach 353.7 billion won, based on a Bloomberg poll. South Korea’s dominant carrier, which has a 50.5 percent share of the market, said sales—up 3 percent year on year, and down 1.1 percent sequentially, had been hurt by an increase in subscribers taking on more aggressively priced tariffs and on an overall decline in subscribers. It was also hit by the cost of foreign debt and reported a loss from the sale of its stake in Helio, its JV with Earthlink (NSDQ: ELNK), to rival MVNO Virgin Mobile USA (NYSE: VM). Operating profit was also down, dropping 6.1 percent to 504.1 billion won compared to a year ago, when the company posted a 373.1 billion won gain. It, too, fell short of analyst expectations, estimated at 584.9 billion won.

Other Earnings Highlights:

—Wireless internet revenue down: Wireless internet revenue declined by 11.6 percent year on year to 619 billion won, hit by its 33 percent cut in mobile internet tariffs. On a quarter-on-quarter basis, wireless internet revenue grew 3.1 percent from growth in flat-rate data plan subscribers.

—SK Telecom now has a total of 22.87 million subscribers. The average revenue per user (ARPU) came in at 42,393 won, down by 3 percent year on year and 2 percent quarter on quarter.

Release

Helio By Virgin Mobile: The Life After Starts

2008-09-09T17:09:46Z

So it starts: Helio brand has been integrated within Virgin Mobile USA (NYSE: VM), after the acquisition earlier this year. At CTIA, the company announced its new branding, at least for Helio: “Helio By Virgin Mobile: Plan To Have It All.” And VMUSA did get all of Helio for the cheap, so works both ways…

Immediate plans include the launch of the Shuttle, VMUSA’s first handset enabled which integrated Helio services as Buddy Beacon; and the enhancement of Helio’s $80 a la carte plan, effective today, to include unlimited minutes rather than the current 1500 minute allocation. More information is available at http://www.helio.com.

As for the transition of Helio’s approximate 170,000 postpaid members into VMUSA, that’s done..for now, the two customer care services and sales operations are separate, with further integration planned over the next several months.

Related

@ CTIA: Glu Mobile Game; AT&T Adds Communities; Opera Joins Symbian

2008-09-09T17:00:02Z

—Opera Joins Symbian Group: Browser developer Opera is now part of Symbian Foundation, a Nokia-led consortium that was set up in June to turn the Symbian mobile operating system into an open-source platform…Opera announced that it is teaming up with Nvidia to build an optimized version of the Opera 9.5 browser into the graphics processor manufacturer’s Tegra line of computer-on-a-chip processors. Any guesses on how long before Opera gets bought by Nokia?

—*AT&T* adds communities: AT&T (NYSE: T) said it is launching “My Communities,” a new downloadable gateway that lets users manage multiple social networking accounts in one place. My Communities was developed by Intercasting Corporation, a mobile social networking company. The application is being launched because recent data shows that people maintain multiple social network accounts, and that are a growing number are using their phones to maintain them. Currently, the app supports several sites including: MySpace, Rabble, LiveJournal, Xanga, Photobucket, and others. Subscribers will automatically get access to others as they are added, and they can register for the sites directly on their phone, which is not commonly offered. The app is available on 23 devices from the MEdiaMall and costs $2.99 a month.

—Glu Mobile to publish “Monsters vs. Aliens”: Mobile Game Company Glu Mobile (NSDQ: GLUU) announced today that it is working with DreamWorks Animation to develop and publish the mobile game for the March 2009 film release of Monsters vs. Aliens. The film is the modern day version of the classic ‘50s monster movie, featuring stars like Reese Witherspoon, Hugh Laurie, Seth Rogen, Will Arnett, Kiefer Sutherland and Stephen Colbert. The game marks the second time Glu is working with DreamWorks. It also developed and published Madagascar: Escape 2 Africa, which will launch worldwide with the film’s U.S. premiere on Nov. 7.