EarthLink, SK Telecom team for U.S. MVNO

EarthLink, the fourth-largest U.S. Internet service provider, announced Wednesday it will partner with South Korean wireless giant SK Telecom on a $440 million joint venture that will create a new mobile virtual network operator (MVNO) dubbed SK-Earthlink.

EarthLink and SK Telecom plan to launch SK-EarthLink in the third quarter of 2005. Over the next three years, the companies will each contribute $220 million to the 50-50 venture, representing SK’s biggest overseas investment to date. So far, the identity of SK- EarthLink’s network partner remains under wraps, although SK is in a strategic alliance with Verizon Wireless.

SK-EarthLink will enter a rapidly growing U.S. MVNO market that includes both established brands like Virgin Mobile USA as well as recent entrants like television sports network ESPN. But according to Andrew Cole, VP and wireless practice leader with management consulting firm A.T. Kearney—which advised both EarthLink and SK Telecom on their MVNO venture—there is still considerable room for new players.

“We don’t see the market as being crowded—we see the market growing,” Cole said. “We’re not proposing these awful companies you see in Europe—these low-cost discounters. We’re talking about guys who are adding value. For the moment, the U.S. market is massive, and it is still embryonic.”

SK Telecom currently controls 51% of the South Korean market, with a subscriber base of 18.8 million. “It’s no secret in Korea that SK Telecom is dominant in its market, so much so that Korean regulators are driving some pretty onerous regulations, including number portability, which is basically one way to allow competitors to take away from SK,” Cole said. “From that, you might infer that international growth is going to be very important to SK, and I think it’s the right move. This is a very smart way to enter a market—you’re not buying AT&T Wireless or a piece of it, you are coming in as an MVNO, which is low-risk and high-value. It’s a very smart move.”