A Foolish Week of Telecom
Mar 30th 2012 8:38PM
Updated Mar 30th 2012 8:42PM
Research In Motion (NAS: RIMM) has decided its wisest course of action would be to forgo head-to-head combat with Apple (NAS: AAPL) and Google and get out of the consumer smartphone business. Instead, it will concentrate on what brought it fame and fortune in the first place: its corporate customers.
RIM's new CEO, Thorsten Heins, said, according to the Associated Press: "We believe that BlackBerry cannot succeed if we tried to be everybody's darling and all things to all people. Therefore, we plan to build on our strength."
As RIM was changing its direction, its former longtime co-CEO, Jim Balsillie, decided to leave the company for good, resigning from RIM's board of directors.
Size doesn't mean everything
Did you know that MetroPCS, with 9.34 million wireless subscribers, and Verizon (NYS: VZ) , with more than 10 times that number, can each claim around 5% of its customers use LTE devices? How can that be, with Verizon's greater resources and its multimedia advertising blitz shoving the LTE buzzword in our faces at every turn?
And Verizon's LTE network is much vaster and faster than MetroPCS's, and it can offer its customers a much greater choice of LTE devices. So why is MetroPCS able to keep up with this giant?
The answer may be in the completely different business models the companies have. MetroPCS operates on only a prepaid basis. That is, its customers don't sign contracts that lock them in -- along with their handsets -- for two years. Since MetroPCS subscribers pay month to month, they're free to buy the latest handsets, albeit at a non-subsidized price, whenever they want. Hence, for those who want and are willing to pay the heftier cost of an LTE smartphone, it's theirs.
Performance obviously doesn't mean that much, either
Sprint Nextel's (NYS: S) share price was cut almost in half in 2011. Obviously, the company's future had been threatened by the AT&T (NYS: T) /T-Mobile merger, but that deal died at the hands of the FCC and the Department of Justice, so its misfortunes can't be wholly blamed on outside influences.
No, the company's own executives certainly must take responsibility for the decisions they've taken -- except that the Sprint board of directors has decided to award CEO Dan Hesse with a raise in pay of almost one-third, to $11.9 million, in spite of being the cheerleader for the $15.5 billion four-year millstone of a deal he made with Apple for the iPhone.
By contrast, AT&T's chairman and CEO, Randall Stephenson, took a $2 million haircut from his total 2011 compensation, mainly for the failure of the T-Mobile deal.
Hey, WiMAX, don't let the door hit you
The company that touted 4G WiMAX as the next big thing has decided to finally let it die a natural death. To put that last nail in the coffin, Sprint's senior vice president of networks, Bob Azzi, has said the company will no longer roll out any new WiMAX devices. Azzi said Sprint prefers to concentrate its resources on its Network Vision upgrade to LTE. That work should be almost completed by the end of 2013, he said.
Brother, can you spare a dime?
Oh, by the way, Sprint CFO Joe Euteneur told an audience at a Barclays investor conference this week that his company could just happen to use an extra $3 billion in funding for that Network Vision upgrade. Unfortunately, this came a week after analyst Craig Moffett of Sanford Bernstein warned in a research note that Sprint had a 50-50 chance of bankruptcy.
Good thing, then, for Sprint that at least one analyst's view of Sprint's life expectancy is 180 degrees from that of Moffett's. Shin Yin of Guggenheim Securities laid out a fairytale scenario whereby a "Goldilocks" Sprint would be able to make the onerous Apple deal work to its advantage.
"In the end," Yin wrote in his research note, "Sprint's iPhone sales may be just right -- not too high so as to destroy margins (through the iPhone's outsized subsidy), but not too low so as to cause share loss and put Sprint's take-or-pay minimum purchase commitment at risk."
Why can't we all get along?
Leap Wireless CEO Doug Hutcheson made a proposal this week that makes a lot of sense. Speaking at the Competitive Carriers Global Expo in Orlando, Fla., he said that one way to deal with the scarcity of spectrum, reduce operating expenses, and make carriers more competitive would be to work out a network sharing agreement. He said this was not a "radical" idea and that many European operators have bought into network sharing wholeheartedly.
To that point, the United Arab Emirates has said it plans on initiating network sharing between the country's two carriers by midyear.
It's a tough business
Dell has decided enough is enough, at least for now. No more smartphones from the company mainly noted for its computers. "Mobility products have shorter lifecycles than laptops and desktops," a company spokesman said.
But never say never. Dell does plan on releasing new mobile devices later this year -- but smartphones? The company wouldn't say.
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At the time this article was published Fool contributor Dan Radovsky owns shares of AT&T. The Motley Fool owns shares of Apple. Motley Fool newsletter services have recommended buying shares of Apple and creating a bull call spread position in Apple. The Motley Fool has a disclosure policy. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.
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