Sprint Nextel Corporation (S) and T-Mobile USA (TMUS) are creating partnerships with other telecommunications companies to help make them stronger competitors against industry leaders Verizon (VZ) and AT&T (T), says Shaun Hong, Managing Director and Equity Portfolio Manager/Research Analyst at Jennison Associates LLC.
“The area of telecom in the U.S. may be more challenging. Sprint shareholders recently approved a deal with SoftBank (TYO:9984). SoftBank, now the majority owner of Sprint, is injecting more cash into Sprint to help make Sprint a stronger competitor, allowing Sprint to invest in its infrastructure,” Hong said.
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T-Mobile has also executed on a deal with MetroPCS (PCS), and despite PCS being a smaller player, the consolidation of the two may bring about more competition for Verizon and AT&T, Hong says, as demand continues within the sector.
“It could be a little tougher for the leaders, Verizon and AT&T. The challengers could have some success, but it’s going to cost them some money to get there. So we think there’s going to be more volatility around the telecom sector. The world is changing at a faster pace. There are some positive things, such as the consumption of data by everybody — whether it’s wireless or over cable modems or DSL, or what the telephone companies offer as broadband products. At the end of the day, that consumption of data, so far, doesn’t seem like it’s stopping. The growth of that demand just continues.”
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