Virgin Mobile, S. Korean telecom provider in merger talks

New mobile applications appealing to youth market are likely at heart of the discussion

Virgin Mobile USA Inc. today confirmed that it was in preliminary discussions with SK Telecom Co., following reports that the two companies could merge and offer a host of mobile data applications suited primarily for the youth market.

A short statement from Virgin Mobile said it is in "preliminary discussions with SK Telecom to explore possible strategic opportunities." The statement said that the discussions are in the early stages and that there are "no assurances that any transaction will result."

Virgin Mobile is the U.S. wireless unit of Richard Branson's Virgin Group Ltd. With 5 million U.S. customers, it has built its U.S. business on prepaid accounts, offering inexpensive cell phones and prepaid phone cards through a number of U.S. retailers. Virgin Mobile went public last October.

SK Telecom has the largest number of mobile customers in South Korea with 22 million. It is a joint-venture partner with Internet service provider EarthLink Inc. in the ownership of Helio Inc. in Los Angeles. Helio operates a 3G wireless network in the U.S. as well as postpay subscription plans and an array of phones called Ocean, Fin and Mysto targeted at younger buyers.

Alex Besen, a consultant at The Besen Group LLC in Washington, said both companies are targeting an audience of consumers ranging in age from 14 to 34. If a merger goes through, he said, the new entity would likely offer mobile data applications in mobile entertainment, mobile commerce and mobile advertising. Virgin could also be hoping to migrate its prepaid customers to a postpaid model, he said.

Copyright © 2008 IDG Communications, Inc.

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