Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



What's Wrong With Verizon Communications Inc. Today?

Verizon Communications (NYSE: VZ  ) is one of the worst performers on the Dow Jones Industrial Average (DJINDICES: ^DJI  ) today. On a mildly gloomy trading day, the telecom sits among the bottom five Dow stocks, nursing a 1.2% haircut. The Dow itself was down about 43 points as of 12:38 p.m. EDT, and Verizon accounted for four of those negative points all by itself.

So what's wrong with Big Red today?

The big news in telecom today comes from Sprint (NYSE: S  ) , whose Japanese chairman Masayoshi Son wants to make a big splash in the American market.

The founder, chairman, and CEO of Sprint parent SoftBank made his billions by shaking up the Japanese market for mobile services, and he's taking that approach to Sprint as well. But he'll need some help to get it done -- and that prospect should scare Verizon's investors.

In an interview with PBS talk show host Charlie Rose, Son said he wants to take on the Verizon and AT&T (NYSE: T  ) duopoly with his own megacarrier of comparable size.

First, regulators must let him acquire fellow mini-major T-Mobile (NYSE: TMUS  ) and its 47 million subscribers (Sprint boasts 54 million) to give the new entity the required economies of scale.

Then the gloves will come off.

Masayoshi Son wants to give American mobile users something to smile about. Image source: SoftBank.

"We need a certain scale, but once we have enough scale to have a level fight, OK," Son told Rose. "It's a three-heavyweight fight. If I can have a real fight, I go in a more massive price war, a technology war."

Regulators worry that combining Sprint with T-Mobile would create less competition rather than more, because there would be fewer nationwide networks. Son would argue the opposite, because you would have three giants of roughly equal scale, and it would be a fair fight rather than two giants trampling on the ants around their feet.

And Son would be perfectly willing to forget about profits for a few years, taking a big price war to the American market. Verizon and AT&T would have to adjust to a third peer undercutting them at every turn, or suffer the consequences as users start fleeing to an obviously less expensive option.

Moreover, Son noted that America has the world's largest market for mobile broadband, but that current services are both expensive and slow by international standards. In a separate interview with CNBC's Squawk on the Street, Son said that Japanese mobile broadband users can get up to 60 megabits per second out of their mobile connections. Americans typically have to settle for 20 megabits. Son's SoftBank is testing connections of more than 700 megabits in Tokyo, and there's a 200-megabit solution ready to roll -- if Sprint gets to merge with T-Mobile first.

"America is the only country that post-paid contract prices are going up," Son told CNBC. "All the rest of the world, prices are going down."

If Son can bring this vision to reality in America, Verizon and AT&T will indeed have a hard time supporting their rising plan costs.

But again, Son contends that he needs the resources of T-Mobile to make all of this happen -- and that's not an easy slam-dunk win.

"You think you can win that argument?" asked CNBC's David Faber to close out that interview.

"I don't know. I don't know," Son replied. "I'm just throwing the stone into the pond, right? I'm just making a wake-up call."

Verizon investors heard Masayoshi Son today. AT&T shares also fell 0.9%. Meanwhile, Sprint shares jumped 1.4% higher and T-Mobile is up 2.2%.

Will Masa win, lose, or draw? Doesn't matter -- this smartphone stock walks away a winner either way!
Want to get in on the smartphone phenomenon? Not sure where the big winners are in this ever-changing market? Truth be told, one company sits at the crossroads of smartphone technology as we know it. It's not your typical household name, either. In fact, you've probably never even heard of it! But it stands to reap massive profits NO MATTER WHO ultimately wins the smartphone war. To find out what it is, click here to access the "One Stock You Must Buy Before the iPhone-Android War Escalates Any Further..."

Read/Post Comments (0) | Recommend This Article (5)

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.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2872651, ~/Articles/ArticleHandler.aspx, 8/29/2015 2:11:01 AM

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...

Anders Bylund

Anders Bylund is a Foolish Technology and Entertainment Specialist. Where the two markets intersect, you'll find his wheelhouse. He has been an official Fool since 2006 but a jester all his life.

Hypoallergenic. Contains six flavors not found in nature. Believes in coyotes and time as an abstract.

Follow Anders on Twitter, LinkedIn, and Google+.

Today's Market

updated 4 hours ago Sponsored by:
DOW 16,643.01 -11.76 -0.07%
S&P 500 1,988.87 1.21 0.06%
NASD 4,828.33 15.62 0.32%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

8/28/2015 4:55 PM
^DJI $16643.01 Down -11.76 -0.07%
S $5.19 Up +0.12 +2.37%
Sprint CAPS Rating: **
T $33.29 Down -0.15 -0.45%
AT&T CAPS Rating: ****
TMUS $40.00 Up +0.06 +0.15%
T-Mobile US CAPS Rating: ***
VZ $46.07 Down -0.12 -0.26%
Verizon Communicat… CAPS Rating: ****