Virgin Mobile Scoops Up Helio For $39 Million

The deal, which equals roughly $39 million in stock, will expand the reach of Virgin Mobile, a Warren, N.J.-based wireless communications service provider, owned by eccentric British billionaire Richard Branson's Virgin Group. Virgin Mobile, which currently offers only prepaid, or pay-as-you-go service without a contract, will now take over Helio's roughly 170,000 customers. Helio's numbers fell this year, dropping from about 200,000 customers at the start of 2008. As of March, Virgin Mobile reported that it had just over 5 million customers.

According to a statement from Virgin Mobile, the deal will likely close in the third quarter of this year and is subject to receiving regulatory approvals.

Along with the acquisition announcement, the Virgin Group and SK Telecom announced they will each invest $25 million in Virgin Mobile, giving SK Telecom, which was Helio's majority owner, a 17 percent stake in Virgin Mobile.

The moves come just days after Virgin Mobile announced its first unlimited rate plan for $80, a $20 savings compared to the unlimited plans offered by rivals T-Mobile and Sprint. Virgin Mobile's plan, however, requires another $10 for users who want unlimited text messaging, IM, email and picture messages.

Virgin Mobile's Totally Unlimited plan was billed by the company as the "lowest priced and first unlimited nationwide calling plan." It does not subject users to roaming charges and lets buyers pay with a credit or debit card and doesn't require being locked into a two-year contract.

Now with the Helio buy pending, Virgin Mobile is trying to change its face in the growing mobility market and hit the younger crowd of mobile device users Helio targeted.

In a statement, Virgin Mobile USA CEO Dan Schulman said that while Helio's branding will likely be phased out over time, Virgin Mobile will continue to run Helio's advanced data services and its contract-based plans as a compliment to Virgin Mobile's current plans, which are prepaid and don't require a contract and are offered on relatively inexpensive mobile phones that can be purchased through most retailers.

The deal also gives Virgin Mobile access to Helio's innovative device offerings and use of Sprint's 3G network and services.

According to Schulman, Helio's customers pay roughly $80 per month for the service because Helio offers advanced features like broadband Web access and downloads. Virgin Mobile customers, conversely, shell out only about $20 per month on average for its pre-paid services. Schulman said the deal should help Virgin Mobile capture high average monthly payments.

Throughout its short life, Helio was never really able to capture the market, because consumers began focusing less on feature phones and heading to smart phones like the Apple iPhone, Palm Treo and Research In Motion (RIM) Ltd.'s BlackBerry lineup.

In the statement, Schulman said that adding Helio's post-paid contract model and its advance services to its lineup will help it entice new customers and convince existing customers to stay longer. Schulman estimated that about 20 percent of Virgin Mobile customers leave the service for a carrier with contracted plans. Schulman said moving to a contract-based post-paid model will likely reduce customer churn.