Virgin Mobile, S. Korean telecom provider in merger talks

Virgin Mobile USA Inc. Wednesday confirmed it was in preliminary discussions with SK Telecom, following reports that the two could merge and offer a host of mobile data applications suited primarily for the youth market.

A short statement from Virgin Mobile said the company is in "preliminary discussions with SK Telecom to explore possible strategic opportunities." The statement said the discussions are in the early stages and that there are "no assurances that any transaction will result."

Virgin Mobile is the U.S. wireless unit of Richard Branson's Virgin Group. With 5 million U.S. customers, it has built its U.S. business on pre-paid accounts, offering inexpensive cell phones and pre-paid phone cards through a number of U.S. retailers. It went public last October.

SK Telecom has the largest number of mobile customers in South Korea with 22 million. It is a joint venture partner with Internet service provider EarthLink Inc. in the ownership of Helio in Los Angeles. Helio operates a 3G wireless network in the U.S. as well as post-pay subscription plans and an array of phones called Ocean, Fin and Mysto targeted at younger buyers.

Alex Besen, a consultant with The Besen Group in Washington, said both companies are targeting an audience of consumers ranging in age from 14 to 34. If a merger goes through, he said, the new entity would likely offer mobile data applications in mobile entertainment, mobile commerce and mobile advertising. Virgin could also be hoping to migrate its pre-paid customers to a post-paid model, he said.