Helio's Hot New Line

The startup mobile outfit aims to ring the bells of young, hip, Web-savy users. If not, it won't be for lack of hands-on market research

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Sky Dayton got his idea for a new wireless service aimed at the MySpace (NWS) generation during a trip to South Korea -- one of the world's most advanced mobile markets. "I had an epiphany moment, as I was walking down the streets of Seoul and watching kids messaging, downloading games, gifting, and begging," says Dayton, chief executive of Helio, which went live on May 2 with a mobile-phone service directed at 18- to 34-year-olds.

To figure out whether a service like Helio would fly in the U.S., Dayton and his crew did intense market research, part of which involved camping out in the homes of 20 young people for two weeks, and following them around with a camera. Says Dayton: "It confirmed what we felt in our gut."

Helio, the joint venture of Atlanta-based Internet service provider EarthLink (ELNK) and Korean mobile carrier SK Telcom, boasts a range of services that includes access to the social-networking site MySpace, a first for any carrier. It also lets users buy content, such as 3D games, that can be delivered directly to a pal's handset. Another service, called Helio on Top, lets customers order up live feeds from channels including Fox Sports, MTV News, and Yahoo (YHOO).


  Though designed for the younger set, cheapskates need not apply. To access the service, subscribers need one of two 3G phones: the Hero, a sleek black slider that retails for $275 and the Kickflip, a pearlescent number with a rotating screen that goes for $250. Both handsets, which are retooled vesions of phones popular in Korea, come equipped with high-resolution LCD displays and a 2.0 megapixel camera with digital zoom and flash (see our slide show, "Phones for the MySpace Generation").

Once they've shelled out for a phone, subscribers can choose from one of three basic plans, starting at $85 per month and topping off at $135 per month. The difference in prices is determined by the number of talk minutes, not data services, which are all inclusive. An a-la-carte plan is also available.

Los Angeles-based Helio is far from the first mobile service to target the data-centric youth market. That trail was blazed by Virgin Mobile, the cellular offshoot of British entrepreneur Sir Richard Branson's brand empire. Virgin Mobile was recently acquired by British pay-TV operator NTL (NTLI) for $1.7 billion.

Like Virgin, Helio is what is known as an MVNO (a mobile virtual network operator). That means the company doesn't have its own wireless infrastructure, but rather piggy-backs on the network of another carrier. In Helio's case, that's Sprint Nextel (S), itself the owner of a brand -- Boost Mobile -- that caters to younger subscribers.

Helio's handsets and services will not be sold through dedicated outlets, but through retail chains, such as Tower Records, F.Y.E, Sam Goody, and Coconuts (the latter three are properties of Trans World Entertainment TWMC), as well as through more than 100 college bookstores.


  While major cellular carriers like Cingular, Verizon and Sprint must cast a wide net, MVNOs have the luxury of honing in on a narrow segment. Helio, for instance, aims for just 3 million subscribers by the end of 2009, says Dayton, who founded Earthlink and Boingo Wireless, a network of Wi-Fi hotspots.

Helio's service plans may seem pricey compared with those sold by mainstream carriers, but the company is gambling that data-addicts will view them as a bargain. "They're aiming for the crown jewel of the wireless markets: early adopters -- young adults who are heavy data users," says Scott Ellison, vice president of wireless mobile at researcher IDC. Getting customers to buy data is critical in an industry where per minute call prices are low and falling.

Indeed, Ellison is betting that it won't be long before Sprint or another major mobile carrier sets its sights on acquiring Helio.

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