EarthLink, SK Telecom To Launch Cell Phone Service

Internet service provider EarthLink and South Korean mobile communications company SK Telecom today announced a joint venture to market wireless voice and data services in the U.S.

The company will be called SK-EarthLink, and EarthLink founder and director Sky Dayton will serve its chief executive. The US$440 million, 50-50 joint venture will offer wireless voice and data services, as well as handsets.

“SK-EarthLink has the potential to reshape the mobile communications market by meeting the growing demand of U.S. consumers who are currently underserved by existing voice-oriented wireless operators,” Garry Betty, EarthLink president and chief executive officer, said.

Selling Synergies

SK Telecom is one of the world’s most advanced wireless carriers, with more than 18 million customers and over 50 percent of the mobile services market in South Korea. The Seoul-based company markets wireless voice and data offerings, including interactive gaming, video streaming and location-based services based on 3G technology.

Meanwhile, EarthLink has gained more than 5 million subscribers that it believes fit the target market for wireless services.

EarthLink also boasts existing mobile virtual network operator partnerships with major wireless operators, established sales channels with a presence in more than 18,000 retail stores, WiFi experience, network data centers and billing capabilities.

SK-EarthLink plans to combine these capabilities to deliver what company executives call “an innovative suite of wireless services and applications that meet the information, entertainment and communications needs of U.S. consumers.” The three-year deal is expected to close in March.

Show Me the Money

SK-EarthLink said that the joint venture could generate approximately 3 million net subscribers and revenues of approximately $2 billion by 2009. SK-EarthLink plans to offer its services using network capacity purchased from Sprint and Verizon Wireless.

Darryl Schooler, a senior analyst with the digital communications research firm Cahners In-Stat Group, told the E-Commerce Times that the details of the deal are too sketchy to discern whether this joint venture will really pay off.

“EarthLink is an interesting ISP,” Schooler said. “They have been trying to do what they can in an electronic information distribution manner. This deal is another way for them to send out their content, touch more customers and further extend the brand. The question is how profitable they can be.”

EarthLink’s Dayton is confident, based on what he’s seen in South Korea.

“In South Korea, kids on the street are using their mobile phones to listen to music, watch TV, video conference, locate their friends and access the Internet — as well as make voice calls — as opposed to the U.S. where the mobile experience is primarily about talking on the phone. Americans are living in the past,” Dayton said.

He said, “Utilizing emerging 3G networks and harnessing the explosive growth of WiFi, SK-EarthLink will take the wireless experience in the U.S. to a new level.”