EarthLink Inc. has already invested about $121.5 million into its soon-to-launch mobile virtual network operator, Helio, according to the company’s recently filed annual report. In addition, EarthLink stated that it has already provided Helio with 27,000 customers.
EarthLink stated that its joint venture with Korean carrier SK Telecom Co. Ltd., “allows us the opportunity to expand and further diversify the markets in which we operate to include the growing voice and data services segment of the wireless market.”
But EarthLink warns investors that its investments in Helio may not produce stellar financial results for some time.
“We expect the financing of Helio’s operations to adversely affect our cash position,” EarthLink said in its report. In addition, we expect Helio to continue to incur losses due to the startup nature of its operations, and we include our proportionate share of the losses of Helio in our statements of operations, which adversely affects our earnings and earnings per share. In addition, Helio may not be successful in developing or implementing its wireless voice and data initiatives, and there can be no assurance that these initiatives will be commercially successful. This would adversely affect our financial position, results of operations and liquidity.”
Also in its annual report, EarthLink said that, “Effective March 24, 2005, we transferred approximately 27,000 wireless subscribers to Helio in connection with completing the formation of Helio.”
Together, EarthLink and SK Telecom have said their funding of Helio totals about $440 million. Helio is expected to launch commercial service sometime this spring in the United States.
Earlier this month, Helio Chief Financial Officer Todd Tappin reinforced Helio’s previous guidance of signing up about 3 million customers and generating more than $2 billion in revenue by 2009. He noted that although Helio would subsidize its handsets, its target demographic is willing and able to pay for high-end phones. RCR
