More Helio and Amp'd Mobile Analysis
9/4/07 – The mobile virtual network operator, or MVNO, business quickly became one of the biggest stories in the Southern California startup community back in 2005 with the launch of perhaps the two most prominent MVNOs, both based in Los Angeles—Helio and Amp’d Mobile. In terms of significance, consider that before its bankruptcy, Amp’d Mobile had raised approximately $360 million dollars in venture capital investment, rivaling any other recent startup. And Helio, the MVNO entry backed by EarthLink and SK Telecom, has raised a ton of money from its investors in order to establish a strong foothold in the U.S. mobile market. Add to the mix Disney Mobile, not exactly a startup, but run out of Disney headquarters in Burbank, and MVNOs, with their mobile entertainment focus, clearly adopted the Los Angeles area as the place to make a go at the yet-unproven business.
In a nutshell, MVNOs lease the basic phone and data capacity from network operators like Verizon Wireless, adding content, specialized devices and other value-added features to the basic service as a package. The model has claimed some high profile entrants, including ESPN’s mobile service and most recently, Amp’d, which filed for bankruptcy and subsequently shut down.
Amp’d Mobile’s bankruptcy has added even more fuel to the argument that the model is too difficult to sustain. On top of that, the news last week that Helio has laid off up to 100 employees has not helped to diminish the negative prognostications. Helio, like Amp’d Mobile, is focused on a young demographic. But unlike Amp’d, which offered service through pre-existing phones, Helio has had some success with unique devices like its Ocean and Fin phones. It also became clear soon after its chapter 11 filing that Amp’d was ultimately doomed by bad collections practices and perhaps just overspending in general. Helio, on the surface at least, seems to be on more solid footing, even though financial reports from investors EarthLink and SK Telecom indicate the company is losing considerable cash.
Avi Greengart, a mobile phone industry expert and analyst at Current Analysis, has written a piece about the MVNO business for RCR Wireless News that may help bring some perspective to the situation: Analyst Angle: MVNO Handset Strategy. He gives Helio points for building its business around a handset strategy, but also emphasizes that it needs to establish a stronger brand identity.
Whether or not Helio can not only survive but thrive is yet to be seen, but its handset-centric strategy, experienced management and big backers may just be the formula for success that has eluded others to this point. On the other hand, many were saying the same about Amp’d before its implosion.
Helio – www.helio.com
Current Analysis – www.currentanalysis.com
