Virgin Mobile USA to Acquire Helio for Approximately $39 Million in Equity - Final.

Original Source: FD (FAIR DISCLOSURE) WIRE

OPERATOR: Good morning, my name is Julie and I will be your conference operator today. At this time I would like to welcome everyone to the Virgin Mobile acquisition of Helio conference call. All lines have been placed on mute to prevent any background noise. After the speakers remarks that will be a question-and-answer session. (OPERATOR INSTRUCTIONS) Miss Erica Bolton, you may begin your conference.

ERICA BOLTON, DIRECTOR, IR, VIRGIN MOBILE USA: Thank you, Julie. Welcome everyone and thanks for joining our conference call to discuss Virgin Mobile USA's acquisition of Helio. Joining me on the call today are Dan Shulman, our Chief Executive Officer; John Feehan, Chief Financial officer; and David Messenger, Chief Administrative and Corporate Development Officer. The press release announcing our definitive agreement went out at 9:15 this morning and is available on our investor website at investorrelations.virginmobileUSA.com.

Please note that is conference call and the related presentation include forward-looking statements. These statements reflect our current views with respect to future events, are not guarantees of future performance and involve risks and uncertainties that are difficult to predict.

Further, certain forward-looking statements are based upon assumptions as to future events that may not prove to be accurate. Many factors could cause our actual results to be materially different from any future results that may be expressed or implied by such forward-looking statements.

The potential risks and uncertainties that could cause actual results to differ from the results predicted include among others (inaudible) discussed in our presentation related to this call and in our filings with the SEC, copies of which are available on our investor relations website and on the SEC website at www.SEC.gov. I strongly encourage you to review these materials.

In addition, we will refer to several non-GAAP financial metrics on our call. For definitions and a reconciliation of these metrics to the most directly comparable GAAP financial measures, please refer to the section entitled 'definition of terms and reconciliation of non-GAAP financial measures' in our earnings release for the quarter ended March 31, 2008 which can be accessed on the homepage of our IR website at investorrelations.virginmobileUSA.com.

So, today Dan and John will give you an overview of the agreement to acquire Helio as well as related transactions and discuss our outlook as it relates to the announcements made today and then take any questions you may have. At this time I will turn it over to Dan Shulman.

DAN SCHULMAN, CEO, VIRGIN MOBILE USA: Thanks, Erica, and thanks everyone for joining us on the call today. John Feehan is here with me today as is David Messenger, our Chief Administrative and Corporate Development Officer who has been instrumental in pulling together this deal.

I would like to start my remarks on page four of the presentation. And I would start off by saying we are frankly delighted to announce this important and transformative transaction. The acquisition of Helio accelerates our ability to offer a full suite of products and services to both prospective subscribers and to our existing base of five million customers.

It creates value for our shareholders as the transaction is anticipated to be adjusted EBITDA accretive in 2008 excluding nonrecurring transition costs and adjusted EBITDA and free cash flow accretive in 2009. We have worked hard to pull together a transaction that works for all parties involved -- for Virgin Mobile and its customers, for Helio's customers and for our shareholders.

And we are also delighted to gain an important strategic partner in SK Telecom, one of the premier wireless companies in the world. They will have two seats on our Board and I would like to officially welcome them to our team.

Strategically, the acquisition of Helio will propel us into the next generation of our wireless offering. It allows us to rapidly enhance the suite of services and products we can offer to our existing and prospective customers. It provides a migration path for our most valuable customers and allows us to enter the valuable post-paid space significantly increasing our addressable market.

We intend to primarily target approximately 140 million postpaid customers who spend between 40 and $70 a month. This is a natural evolution of our product strategy and builds upon our successful expansion into the higher ARPU hybrid space last year and it allows us to very rapidly begin to offer advanced data services and unique and highly differentiated user applications across our entire customer base.

We intend to integrate that functionality into our new handsets beginning in 2009 and support with that prepaid, postpaid and hybrid services. The transaction provides clear financial benefits with a greatly improved capital structure and substantially more liquidity available to the business allowing for accelerated growth.

As I mentioned we expect to see both improved adjusted EBITDA and cash flow generation beginning in 2008 and continuing into 2009 and beyond. We're targeting a fairly quick close in the third quarter and in the interim, Helio in SKT will be implementing substantial and far-reaching operational improvements to deliver an adjusted EBITDA positive asset. These actions are detailed in our agreement as closing conditions.

Let me now turn to slide five and there are a couple of separate points that I want to point out in this deal. So I'd like to walk you through the basics and then we'll provides some more detail.

We are acquiring Helio for limited partnership units that are the equivalent of 13 million Class A shares or approximately $39 million based on yesterday's closing price. And we have committed to a maximum of $25 million in debt and net working capital liabilities related to restructuring and improving efficiencies at Helio.

In exchange for this we acquire several valuable assets. First, we acquire their 170,000 customers who are generating $80 of ARPU. We also acquire a handset inventory of about 85,000 units which Helio has valued at approximately $17 million as well as Helio's state-of-the-art customer …