I've seen it many times: a cool product that finds few customers. That seems to be the case with Helio's mobile phones. Basically, customers didn't want to pay premium prices for such things as access to MySpace and other new-fangled features.

It's a tough lesson (and expensive). SK Telecom and EarthLink (NASDAQ: ELNK) formed Helio as a joint venture in 2005 with start-up capital of $440 million. SK Telecom invested an additional $270 million in the venture last year.

Yet, in the end, Helio turned out to be a big dud. That is, the company sold out for a measly $39 million to Virgin Mobile USA (NYSE: VM). In fact, the space is full of dead companies, such as Disney Mobile and Amp'd Mobile.

I had a chance to interview Frank Dickson, the co-founder and chief research officer of MultiMedia Intelligence. According to him:

Honestly, the merger is a desperate move. Overall, the MVNO (Mobile Virtual Network Operator) model makes sense in a limited number of situations. For example, if a cable MSO wants to leverage its customer base and offer triple or quadruple play offering, there is a clear distinctive competency and the MVNO route makes sense.

Since its IPO last year, the shares of Virgin Mobile USA Inc. (NYSE: VM) have imploded -- going from $15.69 to a low of $1.90. The stock has lifted somewhat lately though, and is now trading at $3.43.

Actually, the company has confirmed that it is talking with Helio -- majority owned by SK Telecom (NYSE: SKM) -- about a possible merger.

Both companies are known as mobile virtual network operators (MVNOs), which means that they provide cell services by using another carrier's infrastructure. Unfortunately, the MVNO model has been extremely difficult to pull off (in fact, there have been several high-profile blow-ups in the space, such as Amp'd).

So will a combination help things?

To get some perspective on things, I had a chance to interview Frank Dickson, who is the Chief Research Officer at MultiMedia Intelligence. According to him:

While Google Inc. (Nasdaq: GOOG) is the undisputed leader in Internet search, the company hasn't done much on the wireless front. Then again, it's a tough market to crack (and, by the way, many companies have failed in the effort).

As a result, Google has had to take an innovative strategy – that is, building an open software platform known as Android. In fact, today the company released the software development kit (SDK). There is even a promotion for $10 million in prizes for developers.

To get some perspective on things, I had a chance to interview Frank Dickson, who is a principal at MultiMedia
Intelligence.

As expected, the Google plan has received a lot of attention. But how important is this?

Although Apple, Inc. (Nasdaq: AAPL)'s iPhone has been in vogue, the Google announcement is the most significant announcement in the wireless industry of the year. It is bringing an open platform to the handset to allow for a global ecosystem of development of applications for handsets. These applications are not only client centric applications, but also network centric applications, allowing the handset to essentially become a thin client for some applications.

Let's also not underestimate the advertising possibilities to allow for the replication of many viable Internet business models on the handset.

Mobile can be a tough space to crack. What are the challenges for Google?

Building critical mass is the most significant issue. Metcalfe's law states that the value of a network is proportional to the square of the number of users of the system. The principle applies here. The ecosystem approach
adds value only if the number of users is significant enough to justify development. If it Google does create critical mass, the Gphone would as significant as ISDN.

What might this mean for other software players in the mobile space?

For most application developers, it provides a common and ubiquitous platform that will greatly increase their total available market. It may be unnerving to many of the existing incumbents. However, the Google Android platform does not necessarily imply that smart phone OS is unnecessary. It will be important for the incumbent OS players to integrate the Android functionality while continuing to add value with handset client features.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates DealProfiles.com.