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Summary:

Virgin Mobile USA (NYSE: VM) today announced that they will be acquiring Los Angeles-based Helio, a competitor backed by SK Telecom (NYSE: S…

imageVirgin Mobile USA (NYSE: VM) today announced that they will be acquiring Los Angeles-based Helio, a competitor backed by SK Telecom (NYSE: SKM) and EarthLink, for $39 million. The deal is complicated because it also includes cash and debt infusions by SK Telecom and the Virgin Group, and a favorable new network deal with Sprint (NYSE: S). Following the announcement, I interviewed CEO Dan Schulman, who called the merger “a transformative deal for the company.” Here are some excerpts:

Many MVNOs have not been successful in the U.S. Together, it seems like you will have a fighting chance. “It’s a fantastic transaction for three reasons: I think it greatly enhances our growth potential with the new capabilities we are getting; it provides us with significantly more scale and a number of cost benefits, and finally it greatly improves our financial strength and financial structure. When you pull all of these things together, it was a transformative deal for the company.

You say this deal wasn’t to compete with mainstream carriers, why not? “This is much more about an evolution of our product strategy, we are staying focused on youth market. The youth market continues to evolve as mobile becomes more central in their lives and everything they are doing. When you think about about when we entered the market six years ago, we were offered basic prepaid service with two handsets, we

  1. This isn't a good deal because of what Helio brought to the table for VM, but only good because it allowed Virgin to do some major financial re-egineering of its debt. So for Dan to pretend that he brought this great brand that will transform the company is fooling no one…

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  2. It's a good deal for Helio and Virgin because SK and Sprint made it so, really sweatening the pot in terms of investment and reduced rates.

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