Virgin Mobile USA Announces Purchase of Helio for $39 Million (Updated)

In a press release this morning, Virgin Mobile USA has announced that it has agreed to purchase Helio from Earthlink and SKTelecom in an all stock deal for a total of 13 million shares and two seats on the board of directors for a total value of $39 million or $8.50 per share.

This deal includes the assumption of $10 million in debt, 170,000 current Helio customers, and the addition of Helio’s customer platform which will allow Virgin Mobile to enter the highly lucrative postpaid services market, with 20% of Virgin Mobile customers currently leaving for postpaid services.

The deal is expected to be finalized in the third quarter, at which time the total amount of debt is expected to be reduced by $35 million in accordance with the completion of transactions relating to the elimination of Helio’s retail footprint, redundant network capacity leases, and the additional total investment of $50 million from both Virgin Group and SKTelecom in exchange for preferred stock and seats on the Virgin Mobile USA board of directors.

This finalizes weeks, if not months of speculation on the apparent health of the MVNO started by Earthlink CEO Sky Dayton in 2005 in an attempt to bring innovation to wireless industry by introducing handsets and devices that were data and messaging oriented in order to draw a niche of tech-savvy consumers, which was less than successful in practice due to its walled-garden approach, while also being criticized for then expensive service plans which bundled unlimited data and messaging years before the current shift towards the same model by the major carriers.

Update: Helio has launched a FAQ page regarding the acquisition by Virgin Mobile detailing the gradual shift to the Virgin Mobile brand while still continuing to offer Helio products and services to new and existing customers.  Since the purchase will not result in the closing of Helio opertations save for the retail footprint, the addition of the of the former Helio subscriber base means that Virgin Mobile will continue to enfoce current Helio customer agreements and ETF policies instead of allowing service cancellation without a termination fee.