Helio continues to drag on Earthlink’s earnings

Internet service provider Earthlink Inc. announced a net loss of $30 million for the first quarter of 2007, including a $29.3 million loss on its mobile virtual network operator endeavor Helio L.L.C. The company reported a net income of $16.4 million in the same period a year ago.
Helio, which is a joint venture between Earthlink and Korean telecom giant SK Telecom, reiterated its previous projection of surpassing 100,000 subscribers during the second quarter of 2007 as it generated $30.4 million in revenue during the last quarter. The MVNO’s revenue for all of 2006 was $46.6 million. Helio reported a net loss of $63.1 million during the quarter, of which Earthlink experienced a $29.3 million loss based on its proportionate share of the MVNO. Earthlink carried a loss of $35.7 million on Helio during the fourth quarter of 2006.
Earthlink also made a $13.5 million capital contribution to Helio during the quarter. The company expects Helio to end the year with 200,000 to 250,000 post-paid subscribers with an ARPU of $90 to $100. Although Earthlink expects Helio to more than triple its revenue for the year to $140 million to $170 million, it anticipates recording a loss of $160 million to $180 million based on its share of Helio’s expected net loss for the year of $330 million to $360 million.
Meanwhile, the Earthlink reported steady progress in municipal Wi-Fi networks, having landed new contracts in Houston and Corpus Christi, Tex., and Arlington, Va. Income from Earthlink’s consumer services segment hit $25.6 million, a decrease of 11.3 percent from the year ago period, due to additional expenses related to launching and growing its municipal Wi-Fi services among other telecommunication services.
Earthlink’s stock was up almost 3 percent on the news.