The Quest for a Better Deal
By
Dave Mock
February 28, 2008
|
Changes are always afoot in the telecommunications space, and service provider Qwest Communications (NYSE: Q) announced earlier in the week that it was looking to revamp its various partnerships to keep it competitive. Like rural telco Citizens Communications (NYSE: CZN), Qwest is a regional player with mostly fixed-line assets. Offering package deals of phone, Internet, and wireless service is a must to keep Qwest competitive with giants AT&T (NYSE: T) and Verizon (NYSE: VZ).
Along with hundreds of thousands of direct customers, Qwest may be the latest to give Sprint Nextel (NYSE: S) the boot and strike a deal with another wireless network operator. Noting that his company has a "hole" in wireless, CEO Ed Mueller stated that Qwest is looking for something different than the current deal to re-sell Sprint services to 824,000 subscribers under the Qwest brand.
Qwest knows what several "virtual operators" have learned over the past few years -- it's tough to make a buck when you wholesale in the super-competitive wireless market. Mobile virtual network operators (MVNOs) like Disney Mobile (subsidiary of Walt Disney (NYSE: DIS)) and now-bankrupt Amp'd Mobile have been dropping like flies, while holdouts such as Helio and Virgin Mobile (NYSE: VM) publicly struggle to turn consistent profits.
Wireless subscribers are valuable assets to a company, and Qwest is no doubt angling for some sort of deal that would better realize this value to shareholders without having to put large sums into wholesale minutes. And while Qwest has remained tight-lipped about potential new partners, Verizon has announced that it is in talks with the company.
With the current deal expiring in early 2009, a partnership with another carrier would be yet another blow to Sprint Nextel, as it continues to hemorrhage subscribers of its own. But Sprint's desire to retain customers gives Qwest the advantage, so it's well-positioned to be looking at its options now.
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