ATLANTA-Helio L.L.C.’s operating costs pushed parent company EarthLink Inc. into an overall loss of $3.2 million for the third quarter, the company reported.
EarthLink shares plunged nearly 10 percent on the announcement as Wall Street reacted to the news. Mobile virtual network operator Helio is a joint venture between EarthLink and Korea-based SK Telecom.
According to EarthLink, Helio “significantly increased its operating activities” during the third quarter with a national TV and print advertising campaign and an increase in its distribution to over 2,500 retail outlets. EarthLink recorded an equity loss of $26.2 million related to Helio in the third quarter, compared with $4.6 million in the second quarter. Operating and marketing expenses related to EarthLink’s voice and municipal Wi-Fi services also contributed to the overall loss, the company said.
“The increase in spending related to Helio and … broadband growth initiatives … resulted in a net loss for the quarter,” EarthLink said.
The losses were greater than EarthLink had expected. The company previously forecast its overall income to fall between $10 million and breakeven in the third quarter due to Helio’s expenses.
Meanwhile, EarthLink expects its losses from Helio to widen. For the fourth quarter, EarthLink said it expects an overall net loss of $15 million to $25 million, due mostly to “an expected equity method loss of $30 million to $35 million attributable to EarthLink’s proportionate share of the losses of the Helio wireless joint venture.”
