Helio did a smart thing, or at least tried to: it released some subscriber numbers and other generally positive date a day before half-parent Earthlink’s earnings numbers were to come in. The picture on Earthlink earnings was one of heavy losses for 2006 on Helio, and continued investments need from Earthlink as well as possibly the other parent SK Telecom.
Today News.com has an “analysis” story on the numbers, and goes in for the short-term, sensationalist route. It writes that the company “bleeding cash, a scenario that will likely force its deep-pocketed investors in one of two directions: either dig deeper still or bid the business adieu.”
The bleeding cash part is correct, but if anyone thought anything else, they had no idea of the economics of this industry. It is a very cash-heavy business, as any retail-and-advertising driven business is, along with the customer service backend, and to judge Helio, or Amp’d and even MobileESPN by Internet-usage-and-uptake standards is fundamentally myopic. Whether they will work or not is another story (and chances are they won’t), but the point is if they ever are to, then we need a more longer term rational view.
If Helio is spinning the subscriber and ARPU numbers to its own advantage, going crazy with predictions of them closing down, based on six months of operations is being blind to long-term business investment strategies.
News.com itself asked the most pertinent question later in the story: The real question is, how much are Helio’s backers willing to spend to keep the venture afloat until they see big returns? If they have already committed $440 million to it, chances are they will see to it for a while.
A phone service is never an easy service, and be it an content heavy MVNO or a low cost Hispanic focused MVNO, it will never become one, so let’s not become delusional either ways.
Related:
-- Earnings: EarthLink’s Q4 Profit Falls With Helio’s Heavy Losses; May Put More Cash Into Helio
-- Helio Aims To Cross 100K Subs In Q2; Launches Music Service