Virgin Mobile has been touted as a success story for US wireless MVNO. However, since IPO, the company has continued to report losses. Helio despite the deep-pocket funding from Korea has also been consistently losing money since launch.

Why would a Virgin-Helio deal make sense? (from http://www.alleyinsider.com/2008/5/why_a_virgin_mobile_helio_deal_makes_...)

Scale: Both operate using Sprint Nextel's (S) network. So more subscribers means more wholesale service they could buy in bulk, on one bill. And, a nice touch, their phones are more compatible than if one of the two used AT&T (T) for its network.

Complementary, not competitive services: Virgin Mobile targets the low- and mid-level of the prepaid wireless business. Its average subscriber spends $20 a month on service. It's also aiming at people who want to spend about $40 a month. Helio's subscribers, meanwhile, spend $85 a month for lots of goodies, including video, 3G Internet access, etc. Minimal overlap, and a good opportunity to upsell to Virgin customers who want to upgrade.

Distribution: We don't expect to see many of Helio's high-end phones next to Virgin's on the shelf at Sears or Wal-Mart. But Virgin has plenty of distribution, and Helio needs more of it.

Cool phones and software: Helio's phones are pretty slick, and the Helio Ocean YouTube app is excellent.

Profitability: Virgin Mobile's stock has not fared well since its IPO: It's down 80% from its 52-week high. But Virgin made $4.2 million of profit on $1.3 billion of revenue last year, while Helio lost $327 million on $171 million of revenue. We imagine there's quite a bit of synergy and cost-cutting that could occur if the companies joined up.

This is a prediction that a merger of both companies to be announced prior to end of 2008. The merger need not require approval not be completed before Jan 1, 2009 to be judged favorably.