MVNOs banding together: A trend?

Telephony Online tackles a question that many have been asking: What does Virgin stand to gain from a merger with Helio? Yes, our initial reaction might be that they’re two cool services, and will become one mega-cool service. But I like gum, and I like peanuts, but I wouldn’t go chewing both at the same time. So what does Virgin Mobile and its 5 million customers stand to gain from Helio and their 200,000?

I’m not the only one that’s a bit puzzled by the idea. Says NERA Economic Consulting analyst Christian Dippon: “The synergies are pretty straight-forward: Virgin’s strong brand name and excellent distribution channels will provide Helio with the much needed market boost. What Virgin gets from the deal is somewhat less clear. Naturally, it allows Virgin to expand its target market from discount subscribers to include teenage, gadget-savvy kids, yet it is unclear whether this will help Virgin Mobile to sufficiently boost its net adds, particularly in the discount segment.”

The idea, I would think, is that this would give Virgin the opportunity to add a postpaid service, as they have in Canada. The merger with Helio, I suppose, would give them a slew of high-end phones to offer these postpaid subscribers.

But if that’s all Virgin’s getting, the deal seems a bit lopsided. Then again, we have no idea what the terms would be, so for all we know Virgin could be getting a sweet deal on this. Or, rather, they might be holding out for one.

As I mentioned previously regarding this arrangement, I wonder how the converged company would go about purchasing minutes from Sprint. Would their current MVNO agreements still be valid, allowing them to purchase a ton of minutes wholesale? Or would the merger force them to sign a new deal with Sprint? I think that factor will play a large role in merger talks.

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