Helio booms, EarthLink’s profits bust

Helio, the virtual mobile network operator jointly owned by EarthLink and SK Telecom, said today it will hit 100,000 subscribers in its youth demographic in April and is generating monthly revenue at a rate that exceeds $100 million a year. That means its young users are spending $100 a month on the service.

Those results were part of EarthLink’s fourth-quarter 2006 earnings announcements, which found the company posting a loss of $24.8 million or 20 cents a share. Those figures include a hefty investment in Helio, to the tune of $35.7 million or 29 cent-per-share equity loss for the quarter. Adjusted EBITDA was $21.5 million. Going forward, company officials said EarthLink expects to post a loss for 2007 as well as it continues to lose narrowband customers and invest in Helio and its broadband initiatives.

For the year, EarthLink had income from operations of $75.6 million with net income of $5 million or four cents per share, compared with $142.8 million or $1.02 per share in 2005. The earnings decrease was attributed to the company’s investment in its broadband initiatives and the equity loss for Helio.

EarthLink founder Sky Dayton, now chief executive of Helio, said the wireless unit is growing faster than expected. In addition to the $100 a month its customers are spending, Helio is generating another $25 a month in MySpace Mobile and video game downloads from customers who average 400 text messages a month, Dayton said. He declined to say when Helio would be profitable. The service just this week announced a music download offering.

Broadband revenues increased to $150.3 million or 35% in the fourth quarter of 2006, compared to the year-previous quarter, primarily due to the addition of New Edge Networks. In addition, EarthLink added 29,000 net new broadband subscribers and 14,000 new voice subscribers, its best quarter in VoIP to date. EarthLink increased advertising and other value-added services revenue by 25% to $24.2 million, generating $1.52 per average customer per month in the fourth quarter, up from $1.21 a year ago.

As expected, narrowband and Web hosting revenues continued to decline. Narrowband revenues were off 15.8% to $145.2 million and Web hosting was down 12% to $8.4 million.

EarthLink officials said the company continues to generate the cash flow required to invest in its broadband growth initiatives.