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Summary:

EarthLink (ENLK), the beleaguered Atlanta-based Internet service provider, is scoring a big fat zero out of two when it comes to capital-intensive technology bets. Earlier this year, the former dial-up darling started pulling back on its MuniFi business and CEO Rolla Huff said EarthLink had repositioned […]

EarthLink (ENLK), the beleaguered Atlanta-based Internet service provider, is scoring a big fat zero out of two when it comes to capital-intensive technology bets. Earlier this year, the former dial-up darling started pulling back on its MuniFi business and CEO Rolla Huff said EarthLink had repositioned its Wi-Fi business without the high-cash spend. Yesterday, with the release of its third-quarter results, EarthLink showed what a cash-flow hemorrhage Helio has been and said it would scale back investment in its MVNO partner as well.

EarthLink will not be required to participate in future funding rounds [in Helio], and will retain a meaningful ownership stake. The definitive amended joint venture agreements are expected to be finalized in the near future.

Helio posted a net loss of $92.3 million on $51.7 million in revenues for the latest three-month period, during which EarthLink provided it with a $30 million loan to cover day-to-day operations. South Korean carrier SK Telecom, EarthLink’s joint venture partner in Helio, agreed to an additional investment of up to $270 million, which EarthLink said would let it “retain a meaningful ownership interest…while not requiring the company to provide additional capital.” While Helio was a 50-50 joint venture between SK Telecom and EarthLink, we’re not sure what the final agreement will be.

During the conference call, EarthLink CEO Rolla Huff said there are no immediate plans for a sale:

Look, I think that the investment that we’ve made there absolutely has value. We have no plans to go out and sell it. It’s a growing business. It’s a business that we support. We clearly understood that putting needed cash into that business was not in the best interest of our shareholders from here on out. We’re going to continue to be part of the governance structure and I think I’ve been saying all along, we believe there’s value in this business.

  1. I am baffled how this once darling of the cyberspace has been bumbling along for 6 yrs now. I would not be surprised if they bite the dust like Excite did. Nothing spoils American big companies like fast success.

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  2. Considering that Earthlink can’t keep my dsl line up for more than 4 hours, it doesn’t surprise me that they have problems executing in the mobile space.

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  3. [...] Posted by todd Sat, 27 Oct 2007 18:53:22 GMT Well, If you are a Helio customer, you might want to get ready.  Things are going to get hairy. “EarthLink will not be required to participate in future funding rounds [in Helio], and will retain a meaningful ownership stake. The definitive amended joint venture agreements are expected to be finalized in the near future.” If Earthlink is out, and the company burned 92.3 million on 51.7 in revenues in the last quarter including a 30 million dollar loan from Earthlink…. well, they might want to get on it.  SK Telecom agreed to “up to” 270MM more, likely giving them 6-9 months runway without a significant change.  I’m not a fan of MVNO’s in general, but good luck anyways. EarthLink: No More Money for Helio « GigaOM [...]

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  4. Pat, if you understood DSL, you would know that your ILEC provides the copper, the IP comes from the ISP (in your case ELN). The problem with the MVNO space is that it is UNE-P Part 2. It is expensive per minute and you are battling against subsidies from billion dollar behemoths and multi-million dollar ad campiagns. No MVNO has that kind of cash or marketing (yet). ELN used to be all about Marketing. Not any more – or they would be bundling Helio with EarthLink broadband, VoIP, Muni – and selling it to their narrowband users.

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  5. [...] providers, it has hit the skids. They gave the pink slip to nearly 900 employees in August. The spending cutbacks on Helio and MuniFi have come too late it seems. Now we have heard from multiple sources that another round [...]

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