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A Foolish Week of Telecom

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T-Mobile USA, the fourth-largest U.S. mobile carrier, is joining the ranks of the other first-tier telecoms -- Verizon (NYSE: VZ  ) , AT&T (NYSE: T  ) , and Sprint Nextel (NYSE: S  ) -- and will be offering Apple's (NASDAQ: AAPL  ) 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 (NASDAQ: TMUS  ) .

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 (UNKNOWN: CLWR.DL  ) , and by accounting questions dealing with a spectrum purchase Sprint made last month from U.S. Cellular (NYSE: USM  ) .

The dish on DISH
Next Wednesday may be the day when DISH Network's (NASDAQ: DISH  ) 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 (NYSE: SKM  ) and KT (NYSE: 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.

Illegal subsidies?

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.

(NYSE: NOK  ) 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 (NASDAQ: MSFT  ) 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
Nokia's been struggling in a world of Apple and Android smartphone dominance. However, the company has banked its future on its next generation of Windows smartphones. Motley Fool analyst Charly Travers has created a new premium report that digs into both the opportunities and risks facing Nokia to help investors decide if the company is a buy or sell. To get started, simply click here now.

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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.

  • Report this Comment On December 10, 2012, at 10:26 PM, KyleSpencer wrote:

    Nokia is ALIVE!

    PhoneArena just chose Nokia´s PureView camera technology in phones as the best innovation of the year. Also Lumia 920 belongs to the best product designs of the year.

    Lumia 920 wins Gizmodo Australia’s Mobile Phone of the Year 2012 People’s Choice Award.

  • Report this Comment On December 10, 2012, at 10:28 PM, KyleSpencer wrote:

    Nokia did announce a couple of months ago (when asked why it bought Norway´s Smarterphone but has not used the OS) that Nokia bought Smarterphone because of the company´s expertise, in order to develop Nokia´s feature phones which are going to be kind of half smartphones right now, e.g. the newest Asha 205 and Asha 206, in which there are features like Facebook, Twitter etc and internet access to thousands of Nokia´s most popular apps.

    Either Nokia has integrated Smarterphone into S40, we don´t know, but the fact is Nokia´s feature phones have become really smarter!

    Apart from the features I mentioned above in the new Asha phones,

    Nokia has already brought an app called Nearby (which is almost the same as Lumia´s City Lens) into Asha phone line!

    In addition to all these, Nokia has 40 most popular games of the world in these Asha phones for free. And Asha 205, 206 is only $60 without any contract at all. And Nokia´s Asha phones are profitable, that is one really important thing to keep in mind, because almost 2/3 of the world´s population is still using a featurephone!

    As Nokia has said, with these Asha phones Nokia is targeting the next billion people to reach internet. There is still a huge opportunity out there which even Android can not target (because cheapest android right now is above $100 and Asha is only $60), not to mention iOS!

    Asha phones were and have been profitable.

    Actually, all the other 4 Nokia´s business divisions (Navteq, NSN, intellectual property rights and feature phones) were profitable in 3Q12, except smartphone division. And the total EPS was -0.07 euro per share, while the consensus was -0.11 euro per share. In other words, Nokia has beaten expectations and estimations (and to be exact, this has already happened in the last two quarters, with beating consensus. Those are ones of the most important reasons why NOK stock has jumped from its lowest this much)! The news of the last two weeks are only part of the whole reason.

    And at this price, NOK is still undervalued!

    Morningstar´s analysis about Nokia:

    Best scenario (if WP8 phones go well): the stock price will go to about 7.70 euro per share.

    Worst scenario: no bankruptcy, because Nokia would be sold in parts before that.

    Estimated price for this: intellectual properties over 1 euro per share (Motorola´s patent portfolio was worth about $5.5 billion); other business parts (smartphones, featurephones, NSN) at least over 1.50 euro per share.

    And NAVTEQ´s price not included (Nokia bought NAVTEQ with 5.7 billion euro). All in all, even in this case, Nokia share price would be at least over 2.50 euro, excluded NAVTEQ! And Nokia´s net cash is now 3.6 billion euros.

    In other words, the sum of parts of Nokia and net cash are worth much more than its market cap now, which means NOK share is right now heavily undervalued.

  • Report this Comment On December 11, 2012, at 7:26 AM, KyleSpencer wrote:

    PhoneArena just chose Nokia´s PureView camera technology in phones as the best innovation of the year. Also Lumia 920 belongs to the best product designs of the year.

    Lumia 920 wins Gizmodo Australia’s Mobile Phone of the Year 2012 People’s Choice Award.

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