We’ve been wondering how “virtual” wireless carrier Helio could lose $560 million in three years, with only 180,000 subscribers to show for it. Now, via corporate parent EarthLink’s (ELNK) annual report to the SEC, we know.
Last year, Helio booked $171 million in revenue: $115 million came from selling mobile phone service and another $56 million from selling phones and accessories. Cost of sales: $168 million, including $71 million on wholesale airtime and $97 million on equipment. This leaves them $3 million — a 2% margin.
But then there’s another $332 million (!) of operating expenses — including $160 million spent on sales and marketing, $99 million spent on operations and member service, and $66 million spent on general and administrative costs. Net loss: $327 million.
At the end of 2007, Helio had $45.1 million in cash. EarthLink, once a 50/50 partner in the venture, stopped throwing in more money last year. But majority owner SK Telecom (SKM) has said it will give Helio at least another $270 million if necessary, and has already cut a check for $20 million this month. How long will that last?