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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8 comments

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Not. Cool.
"There's no doubt the service is cool."

What? Those phones are lame - I thought about switching, then I
realized it wouldn't work on mac or linux and so wouldn't sync
with all my stuff. Then I went to go play with the phones - albeit
they're much better with a little bit of software than the
competition, but the plastic feels somewhat cheap and clunky,
and the overall look and feel doesn't seem cool or sexy. The lack
of compatibility I almost looked over, but the rest just left it
dead. I'll keep my Razor until iPhone hits the streets, sad to say.

I found their marketing and advertising entertaining... but other
than that, I don't get how they fit cool. Amp'd seems to suffer
the same problems, but their commercials aren't even
entertaining - trying too hard to fit in doesn't fit in.
Posted by bradyjfrey (2 comments )
Reply Link Flag
What?
You're not to into this, are you? My Ocean is hooked up to the Mac as we speak!
Posted by Miklay (1 comment )
Link Flag
They need FREE incoming calls
US is probably one of the few places in the world (if not the only) where you have to pay for incoming calls.
Helio is cool - and devices are cool - and they could easily give free incoming calls - that would make revoliution in US cellphone market...
Posted by alenas (181 comments )
Reply Link Flag
Cell phones anywhere?
What about basic service connection that's available anywhere on the planet? NYC lost all cellular service as the towers came down because the Cell phone towers were atop the WTC. What happened to satellite service for cell phones that can pick up calls in any rural or remote area? Might this have saved James Kim's life?
Posted by jsmooy (3 comments )
Reply Link Flag
what a dumb comment
Let's all introduce 8 different topics at any time ! All with silly questions ! !
The WTC was NOT the only cell tower for all of NYC.
Posted by eeemang (217 comments )
Link Flag
Everybody's Chasing The 20 Somethings
The subtext of Helio's "cool factor" marketing is that they are targeting the twenty-something crowd. This seems to be the same market that all the other cellular and media company players are courting. You would think that anyone over age 35 doesn't exist.

One of these days maybe vendors will get a clue and start marketing again to the over 35 crowd. The first ones to do this will find that they have the field wide open to themselves, while the laggards continue to chase after the same baby-bust, limited income, crowd.
Posted by Stating (869 comments )
Reply Link Flag
margin matters
35-something = higher income, but price conscious + resist changes

20-something = limited income, but reckless spending + resist status quo

For growth and margin improvement, the later makes more business sense to chase after.
Posted by iokinetics (5 comments )
Link Flag
$99 Unlimited $99 Helio Ocean
Helio now has unlimited calling for $99 and through the dealer promotions at www.heliopromo.com you can have the Helio Ocean for under a $100. That is a compelling offer for anyone that uses a lot of minutes.
Posted by heliorider (1 comment )
Reply Link Flag
 

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