Can you hear me now? Good!
That might be just what Verizon (NYSE:VZ) said to electronics superstore Circuit City (NYSE:CC) as it induced the company to carry its wireless service over competitor T-Mobile's
Or it could be that double-digit declines in mobile phone sales in the first quarter suggested that they go with the country's largest wireless service provider instead. Verizon Wireless, with 40 million subscribers, is a joint venture between the New Jersey-based telecom and the British wireless giant Vodaphone (NYSE:VOD). Along with the 1,200 stores Verizon Wireless operates on its own, a store-within-a-store will be installed in 570 of Circuit City's 602 locations.
Verizon Wireless has been aggressively trying to expand its market share, buying the New York-area spectrum license of NextWave Telecom in a $980 million deal, along with the wireless assets of Qwest (NYSE:Q) for $418 million, giving it a presence in 14 Western states. Competitors are not standing still either as Nextel (NASDAQ:NXTL) mulls whether to go ahead with a controversial, no-bid spectrum swap and Cingular gobbles upAT&T Wireless (NYSE:AWE) by year's end.
Circuit City has found itself to be the ugly stepchild in competition with Motley Fool Stock Advisor pick Best Buy (NYSE:BBY), much as T-Mobile, a unit of Deutsche Telekom, also finds itself in also-ran territory. The deal could help the electronics retailer stem the loss of market share. By teaming up with Verizon Wireless, it gives itself a higher visibility and greater foot traffic as customers who wish to pay their cell-phone bills or upgrade service trek in. Best Buy has no such agreements.
Retailers are fearful that consumer spending will be weak in the second half of the year. With the rollout scheduled to be completed by November, it's doubtful it will have a meaningful impact on anticipated weak sales. But anything that helps retailers get customers into its stores to see high-priced electronics gadgets is a plus.
It's also got to be a cheaper solution for Verizon Wireless than adding more stand-alone stores, though the company says the deal is independent of whatever other plans it may have. Signs and kiosks have to be cheaper than bricks and mortar.
All is not lost for T-Mobile, however; it still has agreements to sell its service through Wal-Mart, Office Depot, Target, and CompUSA. While it got disconnected from Circuit City, it still has a strong signal.
Fool contributor Rich Duprey uses Verizon Wireless, but he does not own any of the stocks mentioned in this article.
