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Helio Hangs it Up
Virgin Mobile purchased Helio today for $39 million in equity. Helio is a small MVNO that made its name by selling powerful and high-end telephones aimed at technophiles and, thanks to an investment by South Korea’s SK Telecom, Korean-Americans. As part of the deal, Virgin Mobile is also receiving $50 million to pay down Helio’s debt (half from SK Telecom, and half from its parent company Virgin Group), as well as an additional revolving credit facility of $60 million. Just last September, SK Telecom tried to save Helio by pouring an extra $270 million into it, to no avail.
The Helio brand will be subsumed by Virgin Mobile. All of the Helio stores will close except, it’s reported, the flagship store in New York, and there is a full restructuring of the company going on right now. Thus, after much struggling, Helio enters the deadpool.
Helio had 170,000 subscribers while Virgin Mobile currently has about 5 million. The deal will also give Virgin access to a number of technologies owned by Helio including customer management and cellphone deck applications.
Helio also has received investments from Earthlink, but when Earthlink pulled out last year and charismatic CEO Sky Dayton stepped down it was clear something was afoot.
Peter Ha at CrunchGear wrote a full analysis of the merger:
So what exactly does the merger mean for customers of Helio who have grown to love the hardware and features that Helio is best known for? Well, Virgin Mobile will be keeping all of those goodies in place. If you’ve seen any VM devices, you know they stink. VM is relatively boring and absorbing the technology Helio is best known for will certainly boost the MVNO’s status and appeal to a broader audience. That means future VM devices will include apps such as Google Maps with GPS, YouTube and MySpace… all of which Helio brought to the table before other carriers.
What about the Ocean 2? If you haven’t already figured it out by now, the Ocean 2 has been delayed over the last few months because of merger talks. It’s unclear when the device will actually launch, but it hasn’t been scrapped.
While I hate to see Helio dissolve, this is great for both brands. VM knows how to make money while Helio knows how to create technology that works and is appealing.
With Helio gone Boost Mobile in the only targeted MVNO running in the US right now.
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Sonopia Follows Amp’d Into The Deadpool
Mobile virtual network operators (MVNOs) have been having one hell of a time over the past year. The biggest burnout among them was Amp’d Mobile, which lost $360M before realizing its customers couldn’t pay their bills.
While Helio rode high for quite some time, that company has also lost Earthlink as an investor, seen CEO Sky Dayton depart, and accumulated a deficit of $560M.
Now Sonopia, an MVNO that enabled communities and organizations to set up their own branded mobile services (so-called “mini-MVNOs”), has also shut down after failing to gain traction.
According to a former business development consultant, Sonopia’s “approach was too ‘involving’ and too ambitious, offering targeted services and campaigns for segmented groups…which often lacked skills in running even a marketing program, let alone a mobile service.” Apparently the inflexibility of Verizon, its parent carrier, and the over-zealous optimism of founder Juha Christensen also led the company to ruin.
Sonopia is now in the TechCrunch DeadPool.
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Helio And Buzzd Offer Local Entertainment Service
US based MVNO Helio has signed a deal with mobile focused entertainment aggregator Buzzd to offer real-time geotargeted information for bars, clubs and restaurants to its user base.
The service from Buzzd, available to all Helio customers, delivers event and venue information and up-to-the-minute reviews and ratings from friends and other members of the Buzzd community. The service currently provides data from all “major” US cities with continuously updated event feeds which includes pricing, location, and event details. Events and venues are aggregated through partnerships with Flavorpill, TimeOut New York, and CitySearch.
The Buzzd service also allows users to find, connect with and message friends with SMS and messaging features.
Buzzd was founded in 2007 by two mobile media vets, Nihal Mehta, who started the first U.S. mobile marketing agency ipsh! acquired by Omnicom Group in 2005 and Deepen Shah, the founder of eZtext, a company acquired by ipsh! in 2003. The company is operating on an undisclosed private angel round it took on formation.
Crunch Network: MobileCrunch Mobile Gadgets and Applications, Delivered Daily.
More EarthLink Cuts?
The Helio-MuniFi experiments haven’t really worked out for EarthLink. One of the leading independent service providers, it has hit the skids. They gave the pink slip to nearly 900 employees in August. And it seems the spending cutbacks on Helio and MuniFi came too late. Now we’re hearing from multiple sources that another round of cuts is coming — and this one is going to be deep. Our friends at DSL Reports have heard something similar.
Even the senior ranks aren’t going to be spared, we are told. Could the new CEO be on his way out as well? EarthLink might also lose its voice…its voice business, that is. Stay tuned for further details. I think this company might be getting ready to be taken over by a private equity shop, just like Covad.
Amp’d is Done. Helio Surges
It seems like the only way for virtual mobile operators (MVNOs) to get any news today is by shutting down. Amp’d, the high-flying mobile operator, is powering down on July 24. Or to be more accurate, they are “potentially suspending US operations on July 24th.” I guess TechCrunch could be suspending U.S. operations on July 24, too, but we wouldn’t be posting that unless we thought it was pretty certain to be happening. The company has been going through bankruptcy but it was not certain they would be shutting down until now.
Meanwhile competitor Helio, which entered the market at about the same time as Amp’d, keeps on surging. Last week they announced that they reached 100,000 customers and have ARPU (average revenue per user) of $100 - way above the average for mobile startups.
A lot of Helio’s success can be attributed to their new Ocean, a killer dual-slider phone. I actually considered using the Ocean over the iPhone because it has a keyboard and great instant messaging support, but it doesn’t sync with Macs.
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Amp’d Melts Down, Helio Says They Are Doing Just Fine
When Mobile Virtual Network Operator (MVNO) Amp’d declared bankruptcy earlier this week, a lot of people pointed to competitor Helio as the next one to fall.
There are suspicious similarities between the companies. Amp’d launched in the U.S. in December 2005. Helio entered the market just a few months later, in May 2006. Amp’d raised $360 million in capital, Helio raised $440 million from parent companies Earthlink and SK Telecom.
Amp’d claims 200,000 subscribers, and says it grew so fast that its back-end infrastructure couldn’t keep up with demand, requiring the bankruptcy filing. But Amp’d is a MVNO and uses Verizon’s cellular networks, suggesting that there may be a bigger, or at least an additional, problem. Industry insiders point to poor financial management and credit terms that were so easy that a good portion of Amp’d customers aren’t paying their bills.
I spoke to a company spokesperson for Helio today to see how they are doing. They are riding high on the launch of their new Ocean device (also pictured above), a high end dual slide phone that flips up for a number pad and sideways for a full QWERTY keyboard. They claim to have nearly 100,000 customers and are on pace to generate $130 million in revenue over the next twelve months.
Helio’s service is pretty cool (I have a couple of demo phones that I’ve tested). Integration with IM networks and MySpace is seemless. The devices are actually designed by Helio and built to their specifications, whereas Amp’d devices were off-the-shelf varieties that customers could get from any carrier.
Helio was also the first cell phone company in the U.S. to offer phones with GPS capabilities, allowing users to see where they are, get directions to places they want to go, and also see the physical location of all of their friends who use Helio. That last feature has proven to be viral, the company says. As soon as one person gets the phone, a few friends are likely to join soon thereafter.
A lot of Helio’s revenue comes from download purchases, such as music videos. Users can also gift downloads to friends, or beg them to give them one as a gift. It all results in more downloads, and more revenue for Helio.
Helio may end up with the same fate as Amp’d, but there is at least some evidence that the company may have a rosier future.
At least until the iPhone launches and puts the hurt on everyone else in the industry, that is.
For more on MVNO’s, see our coverage of Sonopia (build your own MVNO) and Google’s rumored MVNO in the UK.
See the Helio fact sheet for more.
Crunch Network: MobileCrunch Mobile Gadgets and Applications, Delivered Daily.
Qualcomm backing a Health focused MVNO
Does Qualcomm have a sick business idea on its hands? We’re not sure yet, but check this out.
Wireless Week has a story about Qualcomm and ‘unnamed partners’ building a health-based MVNO called LifeComm that is expected to launch in the second half of 2008. The wireless service will focus on health care — with some of the partners including medical device manufacturers — as well as a brand focused on consumer fitness, and healthy living.
LifeComm will be both a health care and consumer play. Potentially combining the service with some necessary health devices, like heart or blood pressure monitors, could make it more of ‘a necessity’ spend, rather than a luxury item, like Helio or Amp’d. Especially if the startup could ever convince health care providers to recommend the service. Mobile users in Korea and Japan have access to similar health-related services.
Still it is the track record of MVNOs in the US that makes us pause.
As Helio and Amp’d can attest, building a newly branded phone service is incredibly hard and costly. Particularly when the MVNO business model requires significant tolls to the network carrier and massive marketing costs. Virgin Mobile went public recently and still has a negative net income after roughly 5 years in business. ESPN Mobile closed shop and returned from the dead as a content play.
Consumers (at least in the U.S.) are just confused what Helio and Amp’d are. They are starting to bring in some numbers, but signing up the first hundred thousand has been like pulling teeth.
Both Amp’d and Helio have already spent hundreds of millions of dollars on building their businesses. The Wireless Week article says LifeComm will be closing a bridge loan in the next few weeks.
Good luck. Though, there are also a few reasons why Qualcomm’s MVNO could be an easier play than aiming at the tech savvy college and young professional market.
First Qualcomm can probably help negotiate a pretty good deal with a CDMA carrier. With it’s long standing carrier relationships, the company has the kind of weight that can help it at the table.
The article says the phones offered by the service will use BREW. Verizon Wireless may be a likely candidate for that one. Qualcomm and Verizon Wireless have a long standing relationship, with Verizon being the first to recently launch Qualcomm’s MediaFLO service.
KDDI Plans MVNO in the USA
South Korean SK Telecom has Helio. Now Japan’s KDDI is working on an MVNO for the U.S. market, running over Sprint’s network, and is targeting Japanese customers in the U.S. Hopefully they aren’t investing Helio-type dollars for that small of a target market.
GigaOM » Helio’s Last Chance: the Ocean
Helio’s Last Chance: the Ocean
It’s no secret Helio has been burning through money, trying to boost its subscriber base and spark interest in its youth-oriented tech-savvy phone service and devices. The Atlanta Journal-Constitution writes that Helio could go out of business if it doesn’t bring in more funding this year from parent companies SK Telecom, Earthlink, or outside investors. That’s not something customers really want to hear when considering signing up for an expensive phone service.
But Helio’s Ocean messaging device, which we checked out at CTIA last week, could come in as an unlikely savior, though, it is too soon to count on that. The company has spent considerable time on developing the design — and started working on Ocean before Helio was officially a company. The Ocean is the startup carrier’s first breakthrough phone, with its slick dual slider form and messaging interface, and it could catch fire with the young professional set. A big “if” of course, but a chance nonetheless. Here’s 5 ways the Ocean could help turn around Helio:
1). Devices are king: More and more the phones themselves are the reason subscribers are signing up for service. It’s a hits-driven business with the iPhone causing customers to considering switching to Cingular. With no followup hit to the RAZR in site, Moto is learning the hard way. Nokia and Motorola are opening stores in key locations looking to strengthen the handset brand and control the experience. If the Ocean gets enough buzz, it could be the tipping point to get subscribers to sign up for an already quality phone service.
2). Young professionals want the next Sidekick: Time after time, friends in Silicon Valley say when it comes to phone options for personal and business use, they want a better designed Blackberry or Treo, or a more business friendly next gen Sidekick. Moto has the Q, and Samsung has the Blackjack. The next generation of Sidekick (hiptop) devices was more of a basic upgrade, and missed out on this latest opportunity. If Helio stays around long enough, the Ocean could fill this void. It’s $295 and is expensive for the youth market, but the young professional could pony up the dollars for a nice design.
3). Mobile UI: With the iPhone and LG Prada pushing the fluid user interface, consumers — especially the early-adopter young professionals — are tired of the poor consumer experience of phones like the Treo. Ocean is Helio’s way to show off a lot of its nice mobile software details that could win over a lot of loyalty (once you have a chance to use the phone). For example if you start typing while the device is in idle mode, it automatically starts a web search (Yahoo is the default) or a contact list search. For web browsing Helio is using its own slick browser, and the device uses its standard menu layout.
4.) Supports Microsoft’s Exchange ActiveSync: This is a feature that would actually make the device work with corporate networks, a necessity for some of the big-spending young executive.
5). All messaging is created equal: The young professional demographic is young enough to be avid text messagers, while relying on email for much of the day, and also in need of connecting with corporate exchange servers. Helio’s messaging interface doesn’t relegate SMS to a seperate inbox. The device merges all these messaging options together into one place and makes all equally important.
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Helio’s Ocean Surfaces
CTIA 2007, Orlando: Helio announced the Ocean, a seriously slick looking messaging phone. It’s a dual slider with separate QWERTY and numeric key pads, and a comprehensive messaging interface — we’ll have to check this one out on the floor. It’s manufactured by Pantech, designed by Helio, and will be available in the Spring for $295.
Amp’d Raises $107M More
Trying to create an upstart hipster cell phone company is utterly expensive. Peter Adderton and Sky Dayton, the CEOs of MVNOs Amp’d Mobile and Helio, know this all too well by now. Amp’d is adding another $107 million in funding, according to PEHub and VentureWire, which will bring the company’s funding to over $360 million.
Helio has the backing of two public companies that are shelling out a lot of money — $440 million — to get it on its feet. Helio says it will reach 100,000 subscribers by the second quarter of this year while Amp’d officially brought in over 100,000 subscribers by the end of 2006. Though this report says they have close to 200,000 by now.
PEHub says Amp’d raised the series E funds from hedge fund Old Lane Management and return backers Columbia Capital, Highland Capital Partners, Redpoint Ventures, Intel Capital, MTV Networks, Tudor Investments and Universal Music Group. The report says that Amp’d is currently considering raising more money.
They’ll probably need it. The economics of MVNOs are really difficult. Amp’d is a private company and doesn’t have to disclose its revenues, but Helio does. Previously SK Telecom said Helio’s losses are expected to reach between $330 million and $360 million in 2007, up from $192 million in 2006. Helio’s sales are expected to jump to $140 million-$170 million this year from $47 million in 2006. Earthlink reported a fourth-quarter net loss of $24.8 million compared to a profit of $29.2 million a year earlier, in part thanks to Helio.
An Amp’d spokesperson says:
Amp’d Mobile was required to post a public document with the SEC regarding its most recent round of funding but has nothing more to say on it at this time. The company will be issuing a press release on its latest subscriber numbers and funding next month.