Helio burns through $200M in 2006, expects 100,000 customers by Q2

Helio L.L.C. expects to reach the 100,000-customer mark by early in the second quarter, and its subscribers have been generating average revenue per user of more than $100 per month, the mobile virtual network operator said.
The company ended 2006 with 70,000 customers, according to a quarterly report by U.S. parent Earthlink Inc., and is projected to grow quickly in 2007 to end this year with between 200,000 and 250,000 customers.
All of the company’s customers are postpaid, with most of them choosing one of Helio’s four “All-In” plans that range from $65 for 500 anytime minutes to $135 monthly for 2,500 minutes and include unlimited data use. About 25 percent of Helio’s ARPU, or about $25, comes from data.
Helio, a joint venture between Earthlink and Korean company SK Telecom, launched in May 2006 and began a marketing push in mid-July, aiming to provide service for tech-savvy youth with money to burn.
As part of the MVNO’s efforts to boost its customer numbers, Helio announced the launch of a full-track music download service. The service is available on the company’s new Drift handset, and will allow users to access an initial catalog of 150,000 songs from four major record labels: Universal Music Group, Warner Music Group, Sony BMG Music Entertainment and EMI Music.
Songs cost $2 for over-the-air downloads, and Helio plans to introduce a Web-based version of its music store this spring where downloads will cost $1 and can be side-loaded onto the device. Helio customers who do OTA downloads before the PC-based version is launched will be credited with PC copies later. The prices are comparable to full-track services from other carriers.
Michael Grossi, Helio’s vice president of strategy and business development, said the MVNO’s available songs are weighted toward new music that will be of interest to Helio’s demographic. He also said the service’s user interface is designed to be easy to navigate; searchable by artist, album or song; and includes “top music” lists based on customer usage and downloads that will be refreshed daily.
The music service also allows Helio’s signature “gifting” and “begging” services, or the buying and requesting of content for and by other Helio users.
In other music moves, Helio also recently launched AnswerRings, its version of ringback tones, for $2 each plus a $1 monthly subscription fee. The prices are comparable to similar services from other carriers.
Interestingly, Helio is running a Valentine’s Day promotion with $50 off all its handsets, another moved aimed at boosting its subscriber numbers and keeping pace with the industry’s move toward cheaper phones. With prices after discount, Helio’s Kickflip handset is now $50, its Hero is $100, and its recently added Drift from Samsung Electronics Co. Ltd. is $175. The Drift is the MVNO’s first phone to support GPS technology and a locator service.
Meanwhile, Helio’s U.S. parent reported a loss for the fourth quarter due to its investment in Helio. Earthlink Inc. reported a loss of nearly $25 million for the quarter, based on an investment in Helio of $35.7 million.
Earthlink’s net income for 2006 was positive, though, and included pouring almost $85 million into Helio, the company reported. Helio burned through a total of $191.6 million during 2006, making “major investments in infrastructure and products to support future growth,” according to its U.S. parent.
Earthlink described the fourth quarter as “Helio’s first quarter of significant ramp up,” in which it generated $46.6 million in revenue and “ended the year with an annualized revenue run rate in excess of $100 million.” The parent company projected that Helio’s revenues in 2007 will more than triple to between $140 million and $170 million-but the company will also spend more, Earthlink said, with Helio’s net losses for the year pegged between $330 million and $360 million as it incurs marketing and sales expenses without much benefit from economies of scale.