Virgin Mobile and Korea's SK in talks

By Sinead Carew

NEW YORK (Reuters) - Richard Branson's Virgin Mobile USA VM.N and South Korea's SK Telecom (017670.KS), which controls U.S. mobile service Helio, are in early talks on a deal, a person familiar with the discussions said on Friday.

The person, who was not authorized to comment on the matter and asked not to be identified, declined to specify the nature of the talks.

"Virgin Mobile and SK Telecom are having preliminary talks," said the source.

Recent blog reports said the talks have included scenarios such as SK Telecom buying Virgin Mobile USA, which had a market value of about $170 million (87 million pounds), and combining it with Helio.

Under one scenario that has been discussed, SK Telecom would buy out Virgin Mobile USA and do a cash infusion; then Virgin Mobile would buy Helio in an all-stock transaction, moconews.net said in a blog post on Thursday.

The source told Reuters it was too soon to say how a deal would be structured, whether it would involve a merger of the U.S. entities, or a purchase of Virgin by SK, or other possibilities.

Both Virgin Mobile USA -- part owned by Branson's Virgin and Sprint Nextel (S.N) -- and Helio rent space on Sprint's wireless network to target young cell phone users.

Virgin, which has been suffering from customer defections amid U.S. economic weakness, focuses on prepaid services, where customers pay for calls in advance.