Virgin Mobile USA Acquires Helio

Virgin Mobile USA (NYSE: VM) officially confirmed it will acquire rival MVNO Helio from SK Telecom and EarthLink.

The acquisition will cost Virgin Mobile $39 million, paid in limited partnership units equivalent to 13 million of its shares, currently valued at $2.99. Parent firm Virgin Group and SK Telecom will also invest $25 million each of equity capital in the post-merger Virgin Mobile USA.

Dan Schulman, Chief Executive Officer, Virgin Mobile USA, said, "We believe that the acquisition of Helio and the related strategic investments by SK Telecom and Virgin Group are of enormous benefit to our business, both financially and strategically. The reduction of our long-term debt and the increase to our revolver will realign our capital structure, providing us with greater liquidity and increased flexibility to grow our business. At the same time, we will acquire an asset which will add to our scale, allowing us to reduce our network costs and assure that Helio's customers are immediately profitable when brought on to our cost structure. We expect the combined elements of this deal will drive increased Adjusted EBITDA and free cash flow."

$39M for Helio is laughable when you consider both Earthlink (NSDQ: ELNK) and SK Telecom have invested around $600 million in this venture over the last three years.

Note to readers: Don't work for, or invest in, MVNO's.

To get more detail on the merger, click here.