Virgin Mobile USA to Buy SK Telecom's US Unit: FT
Virgin Mobile USA is set to acquire a U.S. mobile arm of South Korea's SK Telecom as both sides agreed to combine their struggling businesses, the Financial Times reported on Wednesday.
A deal was agreed in principle and an announcement could be made as early as this week, a person with knowledge of the matter was quoted as saying. SK Telecom declined to comment.
SK Telecom, South Korea's top mobile operator, said in May it was in preliminary talks with Virgin Mobile about strategic opportunities for its Helio U.S. arm.
Helio, which has been losing money, is 69 percent owned by SK , with EarthLink holding 28 percent.
"Although there's no guarantee that the combined company will succeed, it's still a good move as SK Telecom can reduce risks from the U.S. business," said Lee Shi-hoon, an analyst at Hyundai Securities. "Virgin Mobile has a scale and Helio has strong services, so the combination can work."
The FT said the agreement would see Helio injected into Virgin Mobile USA and the Virgin brand will be retained.
SK Telecom has also agreed to invest a nominal sum in Virgin Mobile USA, the newspaper said.
Virgin Mobile, which is partly owned by Richard Branson's Virgin and Sprint Nextel, serves more than 5 million customers. It has seen growth slowing amid the U.S. economic slowdown and increased competition from rivals.
A merger between Virgin and Helio could make sense as both target young customers and rent space on Sprint's network.
SK Telecom has looked to overseas markets such as China and the United States as expansion becomes more difficult at home where more than 90 percent of Koreans own a mobile phone.
In China, SK Telecom agreed on Monday with Shanghai Media Group, China's second-largest media group by revenue, to cooperate in mobile TV, Internet and content businesses.