Last week, Virgin Mobile and Helio have announced that they are in merger talks:  http://www.moconews.net/entry/419-virgin-mobile-usa-in-merger-talks-with-helio-other-options-still-being-/

While Virgin has not confirmed the talks, this potential move raises, once more, the question of whether the MVNO business model is sustainable. Disney has pulled out entirely of the MVNO market and instead licensed its name and content to carriers. Amp'd has filed for bankruptcy and most recently Movida and Sonopsia also closed their doors. In addition to this apparent trend, US success story Virgin Mobile's net subscriber additions have dropped drastically. Many analysts have predicted that Helio will be next in line as this MVNO struggles to meet subscriber targets.

The merger talks between Virgin Mobile and Helio will undoubtedly not be a merger of equals. Rather, Virgin is likely to acquire the much smaller and more focused MVNO. While it comes with little surprise that Helio is being sold, it is somewhat surprising that Virgin would be interested in such acquisition. The uptakes for Helio are pretty straight-forward: Virgin's strong brand name and excellent distribution channels will provide Helio with the much needed market boost. Furthermore, Virgin will likely sink significant capital in the struggling carrier. What Virgin gets from the deal is somewhat less clear. Naturally, it allows Virgin to expand its target market from discount subscribers to include teenage, gadget-savy kids, and postpaid subscribers, yet it is unclear whether this will help Virgin Mobile to sufficiently boost its net adds, particularly in the discount segment. It might be that the price and terms and conditions under which Virgin acquires Helio are too good to pass on, particularly as the significant economies of scale will likely not materially impact Virgin's cost structure.