MVNO Virgin Mobile USA late last week confirmed previous reports it is to buy youth-oriented rival Helio from SK Telecom for US$39 million in stock. Both Virgin Mobile and SK Telecom will each invest US$25 million in the company; in return, SK will get a 17 percent investment in Virgin Mobile and two seats on Virgin Mobile’s board of directors. The deal is expected to close in the third quarter. Helio is currently owned by SK (69 percent) and Earthlink (28 percent). Virgin Mobile USA has 5.1 million subscribers, whilst Helio has about 170,000.

Confirmation of the deal follows weeks of talks between the firms. “I think the key to success in this business, in a word, is scale,” Virgin Mobile USA chief executive Dan Schulman said on a conference call. However, some analysts polled by Reuters see the deal as merely a combination of two weak players in the US mobile industry. Virgin Mobile USA’s net income for the first-quarter was down 75 percent on the same period last year; it has said it expects to lose between 130,000 and 160,000 subscribers in the second-quarter amid rumours that it is planning to dramatically scale down its operations. Other MVNOs in the US market, including Amp’d, ESPN Mobile and Disney Mobile, have all been shut down recently.