Helio drags at EarthLink earnings

Mobile virtual network operator Helio L.L.C. continued to drag at parent EarthLink Inc. as both firms reported a loss for the second quarter. The news sent EarthLink’s stock down more than 2% to $7.20 per share.
EarthLink recorded a loss of $16.3 million in the quarter, almost the exact reverse of the $16.6 million profit it posted in the same quarter a year ago. EarthLink blamed its negative numbers on its various growth initiatives as well as Helio’s losses.
As for Helio specifically, EarthLink said Helio exceeded the 100,000-subscriber milestone in the second quarter. The MVNO generated $33.2 million in revenue and a $83.8 million loss. EarthLink said it and SK Telecom, joint owners of Helio, have each agreed to provide the MVNO with an additional $100 million in funding.
However, EarthLink’s CEO Rolla Huff offered some cautionary words for EarthLink’s business and Helio specifically: “While EarthLink continues to see robust cash generation from our core access business, we have been challenged in achieving planned results in our emerging growth initiatives. Over the past four weeks, I have had an opportunity to do initial reviews of each of our business units, as well as the Helio investment. These initial reviews are confirming that we have a number of opportunities that are largely within our control to create meaningful shareholder value in the near term. These opportunities are centered around implementing a more focused business strategy and sizing our cost structure to fit our current business. I look forward to sharing our initial decisions and their impact on cash flow, no later than the end of the third quarter.”
As for EarthLink’s municipal Wi-Fi business, the company said it is seeing growth in subscriber numbers, but that the additions couldn’t offset the loss of 177,000 EarthLink ISP subscribers during the quarter. The customer losses are primary due to retreating dial-up Internet access subscribers.