UPDATE: This story was updated at 3:00 p.m. PDT with comments from Helio about its retail strategy and merger talks with Virgin Mobile USA.
Virgin Mobile USA is expected to announce a deal to acquire fellow mobile virtual network operator Helio as early as this week, according to a story in The Financial Times.
The report cites sources close to the companies that say Virgin Mobile and Helio's majority owner South Korean cell phone operator SK Telecom have agreed in principle to a deal. As part of this deal, Helio's subscribers will become Virgin Mobile USA-branded subscribers. And Virgin Mobile USA will give SK Telecom a 20 percent equity stake in the newly combined company. SK Telecom is also expected to invest a nominal sum in Virgin Mobile USA, the article said.
While the combined mobile virtual network operator will still be dwarfed by the four major wireless operators in the U.S., it will have a wider subscriber base that includes both prepaid customers as well as highly valuable post-paid customers. Since Virgin Mobile USA and Helio each buy wholesale capacity from Sprint Nextel to run their separate mobile services, a combined company could help them negotiate better rates with Sprint.
Earlier this week, Gizmodo reported that talks between Virgin Mobile USA and Helio's parent company SK Telecom had stalled. And Helio confirmed rumors that is closing its retail stores.
A spokesman for the company said that Helio has been reviewing its distribution channels.
"We will be putting our emphasis on the most profitable direct channels, Web and telesales, and stepping away from others," he said in an e-mail. "This means we have made the decision to close our Helio stores and kiosks in the short term. Each location will have its own timeline with most kiosks closing immediately and stores closing in the coming weeks."
A spokeswoman for Virgin Mobile USA declined to comment on the Times story. And the Helio spokesman reiterated that Helio, SK Telecom, and Virgin Mobile are in discussions about "potential strategic opportunities." He said the company would give an update when an agreement is reached. The Financial Times reported that SK Telecom representatives in South Korea declined to comment on the merger speculation.