October 25, 2005 9:00 PM PDT

EarthLink mobile venture renamed 'Helio'

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An ambitious joint mobile phone venture between Internet service provider EarthLink and Korean giant SK Telecom has renamed itself Helio, in hopes of creating a new brand aimed at high-tech hipsters.

The Los Angeles-based company, formed earlier this year with seed capital of $220 million from each partner, is creating a new high-end phone service targeted at a young, big-spending demographic.

Headed by EarthLink founder Sky Dayton, the company says it's trying to bring the culture of phone use in South Korea--where networks are more advanced and subscribers spend far more time and money on multimedia and entertainment features--to the United States.

"We're really behind the times when it comes to wireless in the United States," Dayton said. "I think a lot of people are tired of waiting."

With fashion-conscious phones, a simple pricing menu, and even a few flagship stores planned, Helio seems to hope to become the Apple Computer of the phone world. But it's launching into what could be an extraordinarily difficult market.

The joint venture is what's known in the mobile phone world as an MVNO, or mobile virtual network operator. That means that it won't actually own cellular towers or networks itself, and will instead buy time and access to the high-speed networks of Sprint Wireless and Verizon Wireless.

A number of other companies are doing the same thing, largely in hopes of targeting a narrow market segment that the big phone carriers aren't reaching. Disney Mobile wants families, for example; ESPN is after the young sports-watching male; while Virgin Mobile targets the teenage audience that shops in its music stores.

That ongoing rush into the market has worried some analysts, who see signs of a repeat of what happened in the wired telecom world in the mid- to late-1990s. In that market, many small alternative phone companies popped up to offer phone or high-speed Internet service competing with the phone giants, but virtually all vanished a few years later.

"I think we will have a few that survive, and others will go by the wayside," said mobile industry analyst Iain Gillott, founder of iGillott Research. "We already have a lot of people going after that high-income, high-tech, comfortable-with-gadgets group."

What may help set Helio apart from the crowd, despite its new brand name, is the alliance with SK Telecom. That company has dominated the South Korean market, which is already one of the most advanced wireless regions in the world, introducing high-speed data, gaming, streaming music and other services long before peers elsewhere in the world.

Part of Helios' draw will be to introduce advanced Korean phones into the U.S. market, which has generally been a year or two behind Asian markets in terms of handset capabilities and design, Dayton said. The phones will use the high-speed data networks, called EV-DO, operated by Sprint and Verizon.

That won't come cheaply, of course. Helio is clear about who it's not targeting--bargain shoppers, pre-paid customers and older subscribers, for instance--and executives say they have closely studied the consuming and lifestyle habits of tech-savvy late teens and twenty-somethings.

"They have great resources, and they are going after a target segment that I think will be profitable for them," said Julie Ask, an analyst at Jupiter Research.

Much will lie in the details of the company's service, which is slated to launch in spring 2006, however. For now, Dayton said only that Helio would be based around simple, easy-to-understand plans, and was aiming to fit more fully into high-tech lifestyles than the average phone does today.

 

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