A Foolish Week of Telecom

Leap Wireless International held the title of being the only prepaid carrier to offer the iPhone for just one week. On Thursday, Sprint Nextel (NYSE: S  ) announced that its prepaid no-long-term-contract unit, Virgin Mobile USA, will start selling the iPhone to its customers for the same price they could buy one at an Apple (Nasdaq: AAPL  ) store, versus the subsidized versions sold through the major U.S. carriers.

This move should help Sprint move more of the $15.5 billion worth of iPhones it's committed to buy from Apple over the four years than it could have otherwise unloaded on its own. The initial price of $649 for the 16-gigabyte model may put off many of Virgin Mobile's customers, but the monthly charge for an unlimited data plan that is almost one-third the cost of similar plans from the major postpaid wireless carriers may make that purchase easier to justify.

No harm, no trial ... maybe
It looks like some common sense may have prevailed in the increasingly litigious world of high tech. Judge Richard Posner, a federal judge in Illinois, has -- for now -- cancelled Apple's lawsuit against Google-owned Motorola Mobility.

Judge Posner said the two sides' claims for damages could not be determined. "I have tentatively decided that the case should be dismissed with prejudice because neither party can establish a right to relief," Posner said in his written order.

But don't relax just yet. The judge also said, "I may change my mind."

The French conniption
The price war between France Telecom, France's largest telecom, and the six-month-old newcomer, Illiad SA, is going to have a negative effect on something many telecom investors hold near and dear.

France Telecom's CEO, Stephane Richard, said earlier this week that the battle between FT and France's fourth largest mobile operator will most likely undercut its profit margins to the point that its 2013 dividends will be lighter. Current yield from France Telecom: 15.25%. Quel dommage!

The other French mobile carriers, Bouygues Telecom and the Vivendi SA unit, SFR, have also had to cut prices. French mobile profit margins are about as low as you could find in the First World.

Meanwhile, through the Chunnel
Vodafone
and Telefonica's (NYSE: TEF  ) O2 UK unit have said they will increase the scope of their infrastructure sharing agreement to improve LTE access. The move will the save companies more than $1 billion in network building costs, according to independent analysis firm Ovum.

Telefonica, Spain's largest telecom, especially needs the savings. It currently owes $72 billion, and Standard & Poor's recently lowered its credit rating.

And some more sharing
Alaska Communications
(Nasdaq: ALSK  ) and General Communication have joined forces in an attempt to keep the Tier 1 telecoms from the Lower 48 at bay. Alaska and GCI have created an entity called Alaska Wireless Network that will control and operate both companies' wireless resources.

Those assets will include spectrum licenses, switching systems, and the backhaul infrastructure, among other items, to operate an Alaskawide wireless network, which will reach 95% of state's 710,000 residents.

Two cheers for Clearwire
First, Clearwire (Nasdaq: CLWR  ) got some good news this week when it signed an agreement with prepaid wireless carrier Jolt Mobile. Clearwire will provide Jolt with WiMAX capability and 4G service when Clearwire's TD-LTE network is finished next year.

Second, Clearwire joined up with the rest of the non-Verizon and non-AT&T world when it became a member of the Rural Cellular Association. The RCA now can boast of having a membership composed of every significant U.S. mobile carrier but for the two giants.

Clearwire brings only 1.3 million retail customers with it to the RCA, but its joining does help build a solid front in the inevitable struggle the smaller carriers will have to stay competitive with the deepest-pocketed carriers.

Netflix rolls its own
Netflix
(Nasdaq: NFLX  ) has decided to bypass existing content-delivery networks, such as Akamai, Limelight, and Level 3, by building its own CDN. Netflix will call its network Open Connect and believes it will cut costs and improve content delivery.

Limelight, for one, doesn't think this news will shake up the CDN industry. "To us, the whole Netflilx thing is much ado about nothing," Limelight CEO Jeffrey Lunsford told Reuters.

Netflix has tried to pull something like this off before -- to not much avail, according to Jefferies & Co. analyst Aaron Schwartz. "This is not Netflix's first effort at bringing CDN capabilities in-house, so there will be questions on credibility," he said, according to FierceTelecom.

If you want to stay primed on the trends in telecom, check out The Motley Fool's report on the next trillion-dollar revolution. It details a "hidden" component play inside mobile phones that is also a leader in the exploding Chinese market. Hundreds of thousands have requested access to previous reports. You can access this one now -- it's free. Or if you'd like something more company-specific, our senior technology analyst details exactly why Apple still looks like a buy in our new premium research report.

Fool contributor Dan Radovsky owns shares of AT&T. The Motley Fool owns shares of Netflix, France Telecom, Google, and Apple. Motley Fool newsletter services have recommended buying shares of Netflix, Google, France Telecom, Vodafone Group Public, and 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.


Read/Post Comments (0) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

DocumentId: 1907941, ~/Articles/ArticleHandler.aspx, 4/23/2014 8:57:48 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement