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Summary:

So reports FT this evening, citing sources. We first broke the news on the deal talks last month, and after hiccups in valuation and other i…

So reports FT this evening, citing sources. We first broke the news on the deal talks last month, and after hiccups in valuation and other issues, the deal has been signed in principle and that an announcement could be made as early as this week. The deal will include Helio, now majority owned by SK Telecom (NYSE: SKM), injected into Virgin Mobile USA (NYSE: VM), and better-recognized Virgin brand will be retained.

VMUS, which did its IPO on NYSE last October, will issue new shares, leaving SK Telecom holding close to 20 percent of the equity of the enlarged business, which will be worth about $50 million, the story says. SKT will also invest a nominal amount of cash in VMUSA.

Virgin has about 5.1 million mobile customers, all of whom are on pay-as-you-go deals…Helio has about 200K, all post-paid.

Will this deal make any material difference to VMUSA’s chances of surviving in the long term? It will certainly give it some cash, and the Korean expertise in handset and advanced mobile service, for whatever that is worth. It will also give VM an entry into higher end handsets, higher ARPU customers, and better UI that comes with Helio, if they decide to use that. Distribution and still-relatively smaller scale remains an issue…

Possibly the best analysis and rationale of a merger comes from one of our commenters, who posted this in response to a previous post on Helio store closures:

“1. Savings in operations by merging overlapping areas such as IT. This can reduce Helio

  1. This is more like SKT is dumping Helio and tries to save face.

    Virgin will shut down most of Helio's services.

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  2. Good news. But I consider it to be more SKT too. I guess there are no perspectives for Helio.

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  3. lea maclean Monday, July 7, 2008

    call me crazy, but with the current flaws with helios customer service, poor marketing, and costly devices, i feel this 'merger' could be a godsend.

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