EarthLink Cuts Off of Funding to Helio, Hopes to Negotiate New Business Model

6:30 am on September 25, 2007 | Category: Business, Corporate, Telecom Services, Wireless

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Struggling dialup internet provider, EarthLink Inc., has backed off from further funding of Helio, an unprofitable U.S. wireless operator run as a 50-50 joint venture with South Korea’s SK Telecom.

Founded in 2005 and launched last year, Helio remains deep in the red even as it gains subscribers, with projected losses of US$340 million to $360 million this year alone. EarthLink confirmed last Friday that its partner, SK Telecom, had injected another $270 million into the business, but that it would not be able to match this contribution at the present time.

EarthLink also reported that it has entered discussions with SK Telecom to amend their joint venture agreement “to reflect the additional investment by SK Telecom and their future governance of Helio.”

This means that either SK Telecom will take on a larger share of the venture, or Helio will attempt to raise funds from the market, through venture capital or a stock offering, without drawing additional capital from either partner.

Helio is currently one of America’s largest MVNOs (mobile virtual network operators) – a business model that involves piggybacking on the networks of existing carriers, and reselling wireless voice and data service along with other specialized features. Helio’s focus on multimedia content and unique selection of stylish devices is designed to appeal to a younger customer demographic. It had 130,000 subscribers at the end of August, but doesn’t expect to generate a profit until 2009.

The small carrier is currently struggling to distinguish itself from larger rivals, and avoid going down the same path as Amp’d Mobile or Disney’s ESPN Mobile, two other MVNOs which failed to achieve profitability ended up closing their doors.

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    1. Helio is doing incredible on the street. As a helio dealer both online at http://www.heliobuy.com and in our retail chains we can’t keep these phones on the shelf. The Ocean was a huge hit for us and now the Fin has really taken off. More particularly what is being missed is that they are actually tapping into a niche segment that was not even part of the initial plan, the business people. Nearly 75% of our clients have been business people looking to match the smart Ocean PDA phone with the unlimited plan to create a real one two punch.

      Comment by tommy — September 25, 2007 #

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