Brand name, company stores to be shuttered

Helio has hung up on the cell-phone biz, selling itself to Virgin Mobile USA for $39 million in stock.

Los Angeles-based company, founded in 2005 by EarthLink founder Sky Dayton and South Korea’s SK Telecom and launched in 2006, had tried to court younger consumers with a series of exclusive, multimedia-capable Korean handsets that could connect to the Internet and allow users to do social-networking on MySpace, watch videos on YouTube or look up directions via GPS and Google Maps.

It also sought to appeal to Hollywood by trying to put the phones in the hands of celebrities and encourage them to create content for the company’s devices.

Tom Cruise was Helio’s most high-profile backer, showing off its handsets at events. He was also said to be one of the company’s financial backers.

But Helio struggled to compete with larger carriers like AT&T, Verizon, T-Mobile or Sprint and find a foothold; until recently, it had only 170,000 paying subscribers.

It lost $340 million-$360 million in 2007.

Comparably, Virgin Mobile had 5.1 million customers at the end of March. Company buys its airtime from Sprint and offered customers mainly pre-paid phones. Helio purchase now puts it into the post-paid biz as well.

As part of the Virgin takeover, SK Telecom and Virgin Group will each invest $25 million in Virgin Mobile. Move gives SK Telecom a 17% stake in Virgin Mobile.

Virgin Mobile will continue to operate Helio’s data services and its customer-service plans.

“This strategic acquisition integrates Virgin Mobile USA’s brand recognition, scale and extensive distribution with Helio’s accomplishments in advanced handset and content offerings,” Virgin CEO Dan Schulman said.

The Helio brand name will be shuttered. Its five company-owned stores, including one in Santa Monica, and 50 kiosks will also close.

Helio has 570 staffers, and 200 are expected to be pinkslipped by the end of the year. Virgin Mobile has 450 employees.

Deal is expected to close in the third quarter and is subject to regulatory approvals and other closing conditions.

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