A Foolish Week of Telecom

The B-word, "bankruptcy," was dropped in an analyst's research note about Sprint Nextel (NYSE: S  ) , and that caused Sprint's share price to drop 4.5% before the market opened Monday. Craig Moffett of Bernstein Research wrote that Sprint's future could go one of two ways. The first was in a positive direction, according to Moffett, but only if the company "successfully navigates its complicated Network Vision upgrade, stabilizes Clearwire's (Nasdaq: CLWR  ) financial position, and delivers a compelling 4G product." But "some combination of its gargantuan take-or-pay contract with Apple, a hobbled 4G offering, and a stupendous debt burden [could] bring the company to its knees."

However, Moffett added:  "To be clear, we are not predicting a Sprint bankruptcy. We are merely acknowledging that it is a very legitimate risk ... [but] we believe that risk is rising."

Collusion or collision?
Verizon
(NYSE: VZ  ) and Comcast will not only have to get their wireless spectrum/cross-marketing deal approved by the Federal Communications Commission and the Department of Justice, but this week it also had to convince a Senate subcommittee that the arrangement would not amount to a non-compete agreement between those companies and the other cable companies involved in the deal.

Verizon's FiOS and Comcast's Xdinity cable services have been strong competitors for years. But Verizon Wireless and FiOS are two completely different animals, Verizon general counsel Randal Milch testified at the hearing. "These agreements are between cable and Verizon Wireless, not the part of Verizon that provides FiOS," he said. "FiOS is part of the telecom sector, and it will vigorously compete."

But the Rural Cellular Association, which consists of T-Mobile, Sprint, MetroPCS, and others, had a different take on what Verizon and the cable companies were up to. "The Verizon-cable deal is elegantly contrived, superbly clever and very difficult to deconstruct," RCA President Steven Berry said at the hearing.

The ax man cometh
T-Mobile, taking hits from customer-base losses and lower call volume, says it will cut its workforce by 5% and close seven call centers to enable it to afford the $4 billion it says it needs to build its LTE network. Part of the money for that buildout will come from the $3 billion in cash that AT&T (NYSE: T  ) had to pay T-Mobile as a penalty for not completing their proposed merger.

T-Mobile has to do something to stay viable. The carrier saw its customer losses rise to 3.1% in the fourth quarter. That's up from 2.5% in the same quarter a year ago.

What's old is new again
NetZero, the Internet services brand owned by United Online (Nasdaq: UNTD  ) and the company that brought us ad-supported free dial-up Internet access back in the day, is back. This time it's offering free ... or maybe "free" ... 4G wireless broadband access. "Free," because it requires buying either a $50 USB dongle for your laptop or $100 for a Wi-Fi hotspot device.

"Free" also because only the first 200 megabytes of data are free each month. If you want more, you have to pay for an upgrade, and there's no going back to free once you do that. But for Clearwire fans, NetZero will be piggybacking on that company's WiMAX network. Every bit counts.

Don't scratch that itch; you may just be getting a call
In one of the more bizarre pieces of news this week, Nokia has made a patent application for tattoos that will indicate when a person receives a cell-phone call. It works using a magnetic ink that will vibrate the skin for an incoming call. That smartphone really will become an indispensable part of you.

More suits than Sy Simms
AT&T just can't stay out of court. This time the Department of Justice is suing the carrier for fraudulently billing the FCC for texting service for the hearing-impaired. The government says that 95% of the $16 million that AT&T billed for the service since December 2009 was for ineligible calls.

But wait; there's more.

The company will have to pay one of its customers $935 over its so-called "unlimited" data plan. Irate over having his unlimited mobile data throttled, or slowed down, by AT&T, Matt Spaccarelli won his suit in small claims court that the giant carrier broke its promise. AT&T threatened to appeal but wisely backed off. Maybe public-relations common sense won out.

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Fool contributor Dan Radovsky owns shares of AT&T. 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. The Motley Fool has a disclosure policy.


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  • Report this Comment On March 23, 2012, at 11:40 PM, Raymondpoppy wrote:

    Maybe consumers are finally noticing that AT&T and Verizon = The Most Expensive Wireless Plans in America. We know where Verizon and AT&T (both in the top 5 for corporate lobbying) get all that money to run commercials 24x7, pay out huge “fat cat” executive bonuses and hire armies of lawyers and lobbyists to try to push the U.S. market into a wireless industry duopoly -- the American consumer. This is how AT&T and Verizon fashion themselves as brilliant … with their political use of money.

    According to the report “Corporate Taxpayers & Corporate Tax Dodgers 2008-10,” two of the 25 companies with the largest total tax subsidies were AT&T at #2 ($14.5 billion) and Verizon at #3 ($12.3 billion). Also, there were 30 corporations that paid less than nothing in aggregate federal income taxes over the same period. These 30 companies, whose pretax U.S. profits totaled $160 billion over the three years, included Verizon. The report states the laws that allow this were not enacted in a vacuum, but rather were adopted in response to relentless corporate lobbying, threats and campaign support.

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