EarthLink lost $24.8m in its fourth quarter, but startup mobile operator Helio is the cause: The company saw revenue up 5% ($328.2m), with a critical 35% increase in broadband revenue, with just a 15.8% drop in dial-up ($145.2m). EarthLink earned $5m on $1.3b in 2006, down from $143m in earnings in 2005 on a slight revenue increase.
Dial-up revenue is a cash cow for the company. EarthLink's founder recently told me that the cost of providing dial-up is extremely modest even compared to the low rates now charged. While declines are inevitable, it's interesting to see that relatively small of a drop. The AT&T acquisition of BellSouth should push a lot of cheap DSL into territories only served by dial-up or expensive DSL/cable options given the FCC agreement that AT&T signed, and that could accelerate dial-up's decline.
Helio was the driver of this big loss. The mobile virtual network operator (MVNO), a cell operator that doesn't own its infrastructure but purchases access from "real" operators, is a joint venture with SK Teelcom, and had a net loss of $191.6m that quarter, with EarthLink booking half that loss. Helio is acquiring customers at a much slower pace than hoped, and will see losses for the foreseeable future, perhaps hitting cash flow positive by 2009.
They had 70,000 subscribers signed up as of Dec. 31, 2006, and 100,000 anticipated by mid-2007; the division expects 200,000 to 250,000 by the end of 2007.
Each Helio user, however, contributes an average of $100 per month in revenue versus $40 to $50 for major cell operators. While Helio has to purchase its time and data from other operators, it isn't directly saddled with the challenge of building and upgrading those systems.
EarthLink's metro-scale Wi-Fi business wasn't broken out as a separate expense, and they could not have received much revenue yet since few networks were operational even in part in 2006.