Stop me if you have heard this one before.
A cell phone maker, a telecom provider, and a convenience store owner walk into a bar. Says the convenience store owner to the cell phone maker, "I want to display and sell your phones right between a Slurpee machine and a rack of potato chips."
"Great idea!" says the cell phone maker. "I get guaranteed sales out of you, you make profits selling the phones at a markup, and we both win."
The convenience store owner turns to the telecom provider and continues: "And I want you to provide discounted, prepaid service for my customers who buy these phones."
"Great idea!" says the telecom provider. "I get guaranteed sales of my services, you make profits selling discounted prepaid phone cards at a markup, and I, er, cannibalize my own more profitable monthly subscription plans.... Gulp!"
"Great idea!" says the convenience store owner. "It's decided, then. Barkeep? Big Gulps all around. Let's celebrate."
I cannot say with any certainty that this is the way the deal went down, but that is the upshot of 7-Eleven's (NYSE:SE) Tuesday press release. This summer, the ubiquitous Slurpee hawker will be rolling out its "Speak Out" program nationwide, convinced by trial runs in Texas that the program will be a hit. The plan goes like this: 7-Eleven, which already makes big money selling prepaid phone cards to its clientele, will begin selling pay-as-you-go Nokia (NYSE:NOK) phones out of its stores as well. Cingular Wireless, co-owned by SBC Communications (NYSE:SBC) and BellSouth (NYSE:BLS), will pay the service provider through service reseller Ztar Mobile.
The deal looks like a win-win for just about everybody involved, with the possible exception of Cingular. 7-Eleven gets good press for a really innovative idea. It also presumably gets to buy phones and phone-plan minutes at a big discount -- which it will certainly mark up for resale to its customers. Struggling Nokia gets a big boost to its U.S. sales efforts, as 7-Eleven funnels 6 million customers past its phone displays every day of the week -- and the company doesn't even have to design a flip phone to win these sales, because it's the only phone in the store. Why, even SBC and BellSouth may do OK, if volume sales of prepaid minutes make up for the lower margins earned on those sales, compared with subscription plan margins.
Great idea, folks.
What's your opinion about this? Will Nokia benefit in a big way? Take it to the Nokia discussion board to share your thoughts.
Fool contributor Rich Smith owns shares in SBC Communications.
