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: