Q: What are the three most important things that wireless carrier CEOs feel they must have?
A: The iPhone, the iPhone, and the iPhone.
According to Alaska Communications Systems
While [the iPhone launch] was not without its short-term financial implications, not only did we add more new customers, but our existing customer base excessively showed up to renew their contracts and buy an iPhone. Our net subscriber adds of about 2,900 was the highest subscriber growth we’ve had in four years.
Well, whoop dee doo, some might say to a subscriber growth of less than 3,000 -- Verizon
Now, GCI has the iPhone, too, which it acquired around the same time as ACS did. But those carriers didn’t succumb to Apple’s
The enemy of my enemy is my friend
Maybe if AT&T was the only major carrier with imperialistic plans for Alaska, GCI might never have considered joining forces with ACS to help keep Alaska serviced by homegrown Alaskan telecoms. But the news of Verizon’s plans to follow AT&T up north made ACS and GCI decide to hook their wagons together to prepare a common defense against the carpetbaggers.
This past June, Alaskan Communications Systems signed an agreement with General Communication to create the Alaska Wireless Network, or AWN. With the required approval of the Federal Communications Commission, the meeting of certain other regulatory hurdles, and the acquisition of union waivers, the AWN will be able to, in the words of CEO Vadapalli, “… cover 95% of Alaska with the most advanced and extensive coverage, unmatched by any national provider.” (Italicized emphasis added)
GCI will be the majority owner of the AWN, with two-thirds of the network, and ACS will own the rest. Both members of the alliance will contribute wireless assets, which will include spectrum licenses, cell sites, backhaul facilities, and switching systems, among other resources.
ACS expects consummation of the AWN to occur in the second quarter of 2013.
But what if either party gets an offer they feel they can’t refuse from either of the major telecoms? A provision has been made for that possibility. If, as stated in Alaska Communications’ 10-Q, “ACS terminates to accept a superior proposal, ACS would be required to pay GCI a $20.0 million fee, and if GCI terminates to accept a superior proposal, GCI would be required to pay ACS a $40.0 million fee.”
Those fees pale in comparison to the multi-billion dollar penalty that AT&T had to pay T-Mobile USA for the failure of their merger last year. And that makes me wonder if those AWN termination fees are set high enough to dissuade tempting offers to come forth from the major carriers.
If the AWN can survive everything that the economy and the national carriers can throw at it, maybe ACS and GCI can again be on a strong enough footing to return to throwing everything they can at each other.
Neither the iPhone’s help with increasing the wireless subscriber base, nor the AWN news, had a positive effect on the ACS stock price. The shares dropped 4.5% the morning after the earnings release.
The company that the iPhone is really helping, of course, is that amazing company, Apple. To get the full scoop on one of the pre-eminent names in technology today, just click here to grab your copy of the Fool's new premium report on Apple.
Fool contributor Dan Radovsky owns shares of AT&T. The Motley Fool owns shares of Apple. Motley Fool newsletter serviceshave recommended buying shares of Apple. Motley Fool newsletter serviceshave recommended creating a bull call spread position in Apple. The Motley Fool has a disclosure policy.
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