Expensive business - the MVNO Game
From Earthlink’s 3Q Report:
Remember the Earthlink’s figures are only half of the total losses, since they own 50%. It looks like the burn rate on the original US$440m commitment from SK Telecom/Earthlink is pretty high at the moment. It was mentioned that capital contributions for 2007 is expected to fall to US$20m. I must stress, according to Earthlink everything is going according to plan.
Helio are only targeting a 12m slice of the US population which are 18-32 years with household income over US$40k/annum. They are claiming ARPUs of US$100/month which is double Cingular & Verizon levels with Data ARPUs of US$25/month which is around four times the Cingular levels. Interestingly, an incredible 80% of Helio users are using WAP to access MySpace.
In total Earthlink has recorded cumulative losses of US$64,724k in Helio (US$15,608k in 2005 and so far in 9 months of 2006 US$49,116k) that is a lot of money for a reseller to max. 12m people. Until Earthlink releases overall revenue and cost figures, people are going to question the logic of the business model. The jury is still out.
During the third quarter of 2006, EarthLink's wireless joint venture, HELIO, significantly increased operating activities. Specifically, HELIO increased distribution to over 2,500 retail doors and initiated a national television and print marketing campaign. As a result of the increase in HELIO's operating activities, EarthLink recorded an equity loss of $26.2 million in the quarter, compared to an equity loss of $4.6 million in the third quarter of 2005.
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Also during the quarter, EarthLink invested $39.0 million of cash in the HELIO wireless joint venture.
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For the fourth quarter of 2006…including an expected equity method loss of $30 million to $35 million attributable to EarthLink's proportionate share of the losses of the HELIO wireless joint venture.
Remember the Earthlink’s figures are only half of the total losses, since they own 50%. It looks like the burn rate on the original US$440m commitment from SK Telecom/Earthlink is pretty high at the moment. It was mentioned that capital contributions for 2007 is expected to fall to US$20m. I must stress, according to Earthlink everything is going according to plan.
Helio are only targeting a 12m slice of the US population which are 18-32 years with household income over US$40k/annum. They are claiming ARPUs of US$100/month which is double Cingular & Verizon levels with Data ARPUs of US$25/month which is around four times the Cingular levels. Interestingly, an incredible 80% of Helio users are using WAP to access MySpace.
In total Earthlink has recorded cumulative losses of US$64,724k in Helio (US$15,608k in 2005 and so far in 9 months of 2006 US$49,116k) that is a lot of money for a reseller to max. 12m people. Until Earthlink releases overall revenue and cost figures, people are going to question the logic of the business model. The jury is still out.
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