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.