A merger between Virgin Mobile USA and Helio, the two beleaguered US MVNOs, could be announced by the end of the week, according to a Financial Times (FT) report this morning. The paper, citing unnamed sources, claims that Virgin Mobile and South Korea’s SK Telecom – the majority-owner of Helio – have agreed a deal that will see Virgin Mobile acquire Helio and SK Telecom take a 20 percent stake in the merged entity, which will retain the Virgin brand. SK Telecom confirmed last month that it was looking at “strategic” opportunities with Virgin, but later reports suggested the talks had been inconclusive.

According to the FT, the merger will create an operator with 5.3 million subscribers – small in comparison to the main US networks – but reportedly large enough to allow it to target lucrative monthly contracts and to renegotiate what it pays to rent mobile capacity on Sprint Nextel’s network, which both MVNOs currently use. The deal is seen as a survival strategy for both companies, which have been hit by unfavourable conditions in the US MVNO market. Virgin Mobile USA’s net income for 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 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.