A Foolish Week of Telecom
Dec 7th 2012 6:05PM
Updated Dec 7th 2012 6:12PM
T-Mobile USA, the fourth-largest U.S. mobile carrier, is joining the ranks of the other first-tier telecoms -- Verizon , AT&T , and Sprint Nextel -- and will be offering Apple's iPhone starting next year, said T-Mobile CEO John Legere in Bonn while speaking at parent company Deutsche Telekom's Capital Markets Day.
The even bigger news may be that T-Mobile will do so with a twist: no subsidies. None, nada, zilch. Not for the iPhone, nor for any other cell phone.
How this plays out will be interesting to watch. Not having to pay subsidies will certainly help T-Mobile's operating margin, but will having to pay $649 for the basic iPhone 5 scare customers away?
The rise of T-Mobile?
But the iPhone and no-subsidy announcements were only the latest newsworthy bits concerning T-Mobile this week. According to Reuters, several people with knowledge of Sprint's plans said that Sprint would not be making a counteroffer to upset T-Mobile's deal to acquire MetroPCS .
Metro's stock price, which had been climbing on investor anticipation of such an offer, dropped 7% after the Reuters story broke. Metro's CEO, Roger Linquist, speaking at a UBS conference this week, said Sprint was an "interloper" in its attempts to butt into the T-Mobile-MetroPCS deal, calling the speculation "a huge distraction."
This week Sprint and SoftBank, the Japanese company that plans to buy 70% of Sprint, postponed for three weeks the filing of their venture's proxy statement with the SEC. Sprint said the delay was due to the complex nature of its deal with SoftBank.
However, Reuters' sources said the postponement was caused by Sprint negotiating interest payments due it from loans made to Clearwire , and by accounting questions dealing with a spectrum purchase Sprint made last month from U.S. Cellular .
The dish on DISH
Next Wednesday may be the day when DISH Network's hopes to become a wireless carrier are fulfilled -- or dashed.
That's when the Federal Communications Commission will vote on proposed rules that would allow DISH to use parts of a spectrum band for its planned satellite-based wireless network. However, the spectrum DISH wants is also coveted by Sprint, which wants to use it for its 4G LTE network, and Sprint has called DISH's proposal "vague and ambiguous."
Damned if you do; damned if you don't
South Korea's two largest mobile operators, SK Telecom and KT , find themselves in a difficult position. They are Korea's official distributors of Apple's mobile devices, and today's the day they can start offering the iPhone 5.
That's the good news.
The problem is that those companies are expected to engage in a fierce battle for iPhone customers and will offer ever-larger subsidies to lure customers away from each other. The Korean government is so afraid that such a battle would be detrimental to the economy it has warned those companies that offering excessive subsidies is illegal and would be punished.
Yes, Korea is one of the few places where there is actually a law against offering excessive cell phone subsidies. At present, the threshold for "excessive" is $249. Subsidies actually being offered are around $361, or half the suggested retail price of an iPhone 5 in Korea.
And what would a punishment look like?
In 2002, because of breaking the excessive subsidy law, SK Telecom received a 30-day ban on signing new customers. KT received a 20-day ban. In 2004, SK Telecom received a 40-day ban, and KT a 20-day ban.
Nokia has had its ups and downs this year. Losing its crown as the world's No. 1 cell phone maker to Samsung. Getting little traction so far in its bid to help Microsoft's Windows Phone 8 become a viable third major smartphone ecosystem. Watching its stock price drop 50% -- though that has been edging up as late.
So now the latest humiliation is that it has just sold its headquarters building in Finland. Price: $221 million.
On the bright side, Nokia has signed a long-term lease to stay in the building the company has occupied since 1997.
My how time flies. This week marked the 20th anniversary of commercial text messaging using the Short Messaging Service, or SMS. At that time no one could have imagined that this afterthought of a feature added on to the GSM voice standard would have the cultural and economic impact that it has.
Last year 8 trillion text messages were sent globally, generating more than $100 million for the mobile industry.
That first SMS communication was this: "Merry Christmas."
If Alexander Graham Bell used SMS to send his first telephony message, it could have come out like this: mwchiwtsy.
Or, "Mr. Watson -- come here -- I want to see you."
The times, they are a-changing
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The article A Foolish Week of Telecom originally appeared on Fool.com.Dan Radovsky owns shares of AT&T and Nokia. The Motley Fool owns shares of Apple and Microsoft. Motley Fool newsletter services recommend Apple and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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