Earthlink puts muni Wi-Fi biz up for sale: Helio JV fails to hit subscriber forecasts

EarthLink Inc. has officially shut down all operations related to its municipal Wi-Fi projects that hit the skids last summer. Making good on earlier promises, the company is looking for potential buyers after writing down a $20.7 million charge on discontinued operations related to its municipal Wi-Fi assets.
“While the company has no definitive agreements to sell these assets, the company classified the municipal Wi-Fi results of operations and assets as discontinued operations for all periods presented,” the company said.
Last fall, EarthLink also backed out of further investment in Helio L.L.C., a joint venture mobile virtual network operator with Korean telecom operator SK Telecom. For 2007, Earthlink reported a $111.3 million loss on its proportionate share of Helio’s losses.
Last week, Helio announced “record growth,” and said founder Sky Dayton would leave his CEO post to become chairman.
Helio finished the year with a little more than 180,000 subscribers, which fell short of its forecast between 200,000 and 250,000 subscribers by year’s end. Helio also said that its subscribers’ ARPU is greater than $85 per month, well above the industry average of about $50.
“Because EarthLink continues to own a meaningful stake in Helio, we’ll continue to work closely with our partners at SK to build the value of the Helio business,” Earthlink President and CEO Rolla Huff said in a conference call after announcing financial results for the year.
Many analysts say there was little silver lining for EarthLink in the Wi-Fi deals it made with about a dozen cities. The deals called for EarthLink to shoulder all of the upfront costs, and when other divisions of its business began to wane, it began having serious second-thoughts. It wanted the municipalities to help pay for the construction, but San Francisco and others were unwilling to meet the company halfway.
“We made the decision to stop any further market rollouts and substantially reduce the cash being spent on this initiative while we search for ways to make the model viable,” Huff said in yesterday’s conference call. “We’ll continue to provide service to people currently on the networks until disposition of the assets in the various communities has been accomplished. We’re actively working to determine if there are viable outside buyers for the assets or if the cities themselves are interested in the assets. We are looking to come to a solution with the municipalities that work for them and reduces our future spending obligations.”