February 7, 2007 12:55 PM PST
Is Helio's cool factor enough?
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Cingular Wireless, now owned entirely by the new AT&T, signed up 2.4 million new customers in the fourth quarter alone. Even Sprint Nextel, which has been struggling lately, netted 742,000 additions for the fourth quarter of 2006.
Of course, these are well-established brands that have been in the market for years. But Helio's numbers still fail to impress when compared with early subscriber rates for other successful MVNOs such as Virgin Mobile and Boost. Virgin Mobile had more than 350,000 U.S. subscribers within its first six months of operation in 2002 with about 1 million subscribers within its first year. And Boost, which is owned by Sprint Nextel, signed up roughly 250,000 subscribers within its first year of business.
"I think part of the challenge is they are going after the same subscribers that the big cell phone operators want to keep," Whetstone said. "There's no doubt the service is cool. But they're trying to get people to switch service providers, which is much harder to do than simply getting folks who've never even had a cell phone to sign up for a new service."
Still playing it cool
Helio representatives say they aren't worried. The venture reported monthly average revenue per user of about $100, well above the $40 to $50 a month the big carriers are reporting. The company also says that it is very focused on a highly profitable sliver of the overall cell phone market, which means it doesn't have to spend its marketing dollars on trying to reach every consumer.
"We are more confident today than ever before," said Rick Heineman, director of communications for Helio. "We know this is a cash-intensive business, but we are ramping quickly. And we don't need to get to tens of millions of subscribers before we start making money. We can do it with just a couple of million subscribers."
There's no doubt that the Helio products and services, which leverage technology from SK Telecom, strike a chord with early adopters. The three phones that Helio has released get high marks for design and functionality. It's also launched a bevy of new data services including mobile Myspace, a GPS friend locator and integrated Google maps, and, most recently, a new wireless music-download service.
And the company has already launched four hip cell phone "boutiques," in San Diego, Santa Monica, Palo Alto and Denver. More are slated to open in 2007, including a store in the chichi SoHo neighborhood in New York City later this year.
But large operators are also trying to court these consumers with their own music and video download services. The scheduled introduction of Apple's new iPhone on Cingular's network starting in June only intensifies the pressure. Apple has already established a loyal following of iPod lovers, and analysts have predicted a quick ramp-up for iPhone in its initial launch.
"Apple's iPhone validates our strategy of creating a premium brand," Helio's Heineman said. He also pointed out that some consumers may not be willing to spend the $600 on an iPhone when they can get a Helio phone for around $225.
But if Helio is forced to compete on price, which to this point it has tried to avoid, the company could see its strong average revenue per user drop off drastically, which ultimately could impact profitability.
"Sky Dayton is an amazing marketer," Whetstone said. "I wish them well. But the numbers speak to the challenge. It's not an easy business."
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