Virgin Mobile to Buy SK's Helio: Report

Virgin Mobile (VM Quote - Cramer on VM - Stock Picks) will acquire SK Telecom's (SKM Quote - Cramer on SKM - Stock Picks) U.S.-based Helio unit, according to a source quoted in a published report Wednesday.

The Financial Times reported that Helio, the U.S. mobile arm of SK Telecom, will be wrapped in to Virgin Mobile, with the better-recognized Virgin brand being retained. The report quoted an unnamed source who said that both sides had reached a deal in principle and that an announcement could come as early as this week.

Both Virgin Mobile and SK Telecom offered no comment on the report.

Virgin Mobile is expected to issue new shares to complete the deal, leaving SK Telecom holding approximately 20% of the equity of the joined business, a stake worth about $50 million. SK Telecom has also reportedly agreed to invest a nominal sum in Virgin Mobile.

An announcement would not come as a complete surprise, as Virgin Mobile said last month that it was discussing strategic opportunities with SK Telecom. Virgin Mobile currently has more than 5 million users, all of which have shirked traditional post-paid contracts with telecom giants like Verizon (VZ Quote - Cramer on VZ - Stock Picks) and AT&T (T Quote - Cramer on T - Stock Picks) in favor of Virgin's pay-as-you-go service.

Helio, meanwhile, has roughly 200,000 subscribers on monthly contracts.

On Tuesday, Virgin Mobile announced a new unlimited calling plan for $79.99 a month, jumping into the fray of price undercutting. Verizon Wireless, the joint venture between Verizon and Vodafone (VOD Quote - Cramer on VOD - Stock Picks), recently introduced its $99.99 a month plan, which its rivals quickly matched.

Shares in Virgin Mobile were surging 26 cents, or 8.9%, to $3.17, but have fallen 80% since the company went public in October 2007. SK Telecom was recently up 27 cents, or 1.3%, to $21.21. Earthlink (ELNK Quote - Cramer on ELNK - Stock Picks), which holds a minority stake in Helio, was tacking on 2 cents, or 0.2%, to $9.32.