An Ignoble Experiment

2. Sprint CFO: Dish, SoftBank deals aren't affecting Network Vision deployment

Verizon Communications (NYSE:VZ) has hired advisers in advance of a possible $100 billion cash and stock bid for Vodafone's 45 percent stake in Verizon Wireless, according to a Reuters report.

The report, which cited two unnamed sources familiar with the matter, is the latest in a string of media reports speculating about the future of Verizon's relationship to Vodafone. Verizon executives have said Verizon is interested in acquiring Vodafone's stake in Verizon Wireless, but have said much of the speculation on the topic is premature.

The Reuters report said that Verizon has not issued a formal proposal to Vodafone yet but has hired both banking and legal advisers for a potential offer. Further, the report said Verizon wants to push aggressively for a deal now and is prepared to take a bid public if Vodafone does not engage. Verizon's board is expected to discuss the potential deal next week at a regularly scheduled meeting, the report added.

Vodafone declined to comment, according to Reuters. Verizon declined to comment but referred to an April 2 statement when it said it still has an interest in buying Vodafone's 45 percent stake in Verizon Wireless. In that same statement, Verizon said that it does not "currently have any intention to merge with or make an offer for Vodafone, whether alone or in conjunction with others."

Citing unnamed sources, the Financial Times had reported that Verizon considered buying Vodafone's 45 percent stake in Verizon Wireless while AT&T (NYSE:T) would take on Vodafone's non-U.S. assets in a deal valued at $245 billion. Verizon denied that report.

"With respect to Vodafone, obviously, we made a public announcement on April 2, and I would reference all of you back to that announcement," Verizon Communications CFO Fran Shammo said during Verizon's first-quarter earnings conference call in April 18. "Of course, as we've always said before, we are very interested in acquiring the 45 percent stake in Verizon Wireless that we don't already own." Shammo also said the company is "extremely confident that such a transaction could be accomplished in a manner that is very tax-efficient and would not result in a tax on the gain in that stake."

For now, all that's left for analysts to do is speculate about whether, when and for how much Verizon will buy Vodafone's stake in Verizon Wireless, which is seen as a much more likely scenario than any other kind of transaction.

"We doubt that [Vodafone management] or shareholders would be willing to sell for $100 billion; however, this is a good starting point for negotiations," wrote New Street Research analyst Jonathan Chaplin. "We believe a deal could be struck that would create significant value for both sets of shareholders. We continue to believe a deal is likely before year-end."

Analysts at Jefferies wrote that they think Vodafone management is comfortable with the status quo and that Verizon is "attempting to up pressure" on Vodafone. Vodafone CEO Vittorio Colao has said he has an open mind on whether to sell the group's 45 percent stake. The Jefferies analysts wrote that the deal's "valuation will need to climb to much higher to create an outcome acceptable to Vodafone shareholders in our view."

Analysts at CCS Insight said there are pros and cons to Vodafone in making a deal now. "If Verizon were to make an offer for the remaining shares in its joint venture, it would create a dilemma for Vodafone," they wrote. "On the one hand, Verizon Wireless provides a vital revenue stream at a challenging time for Vodafone. It continues to show excellent growth and is already capitalizing on its substantial investment in LTE."

"But on the other hand, a chance to shore up ailing European operations and to invest further in fixed-line assets could prove hard to turn down," they added. "Such investments could open significant revenue opportunities through converged services and would counter the increasing threat from cable providers."

Verizon Wireless paid an $8.5 billion dividend to its parent companies late last year, split along the lines of their stakes in the company. The payment was less than the $10 billion payment Verizon Wireless distributed in January 2012, which was the first time the carrier had paid out a dividend since 2005.

For more:
- see this Reuters article

Related Articles:
Verizon denies plans to bid for Vodafone - with or without AT&T
Report: Verizon, AT&T consider blockbuster $245B joint bid for Vodafone's assets
Report: Verizon wants to resolve Vodafone relationship in 2013
Vodafone's Colao: We don't need to sell Verizon stake to bolster European markets
Verizon Wireless to pay $8.5B dividend to parents Verizon, Vodafone
Verizon Wireless to pay $10B dividend to Vodafone, Verizon Communications

Read more about: rumors, Verizon
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By Phil Goldstein

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3. MetroPCS: LTE customers make up 39% of subscriber base

Sprint Nextel (NYSE:S) is squarely focused on driving its Network Vision network modernization project, which includes the rollout of LTE network technology, and is not letting Dish Network (NASDAQ: DISH) and SoftBank's competing bids for the company affect the effort, according to Sprint CFO Joe Eueteneuer.

In an interview with FierceWireless, Euteneuer reiterated what CEO Dan Hesse said on the company's first-quarter earnings conference call, that "we haven't taken our eye off of operations."

"Irrespective of the two deals, we are running our business as if none of the deals are going to close and we have to remain a sustainable, standalone entity," Euteneuer said. When asked if the deals are affecting how Sprint management is executing on Network Vision, Euteneuer said "not at all."

Some analysts have worried that the deals, and their drain on management's time and energy, will affect the pace of Sprint's network upgrade, which is a multibillion-dollar effort to retool Sprint's networks. It includes the shutdown of the Nextel iDEN network, scheduled for June 30; upgrades to Sprint's CDMA service; the deployment of LTE on Sprint's 1900 MHz PCS spectrum; and the deployment of CDMA voice service and eventually LTE on Sprint's 800 MHz spectrum, which used to be reserved for iDEN service.

Sprint currently has more than 13,500 Network Vision sites on air, up from the 8,000 the carrier reported on Feb. 7. The carrier said its rollout is ahead of schedule. Euteneuer said Network Vision "is at a great pace," and that Sprint will look to maintain that pace as it goes through the year.

Industry analyst William Ho recently told FierceWireless that in the short-term Sprint's LTE plans will progress as planned for the rest of 2013 and possibly into 2014 because that capital has already been allocated. Sprint spent $1.8 billion on capital expenditures in the first quarter, which included $1.4 billion on Network Vision. Euteneuer noted that Sprint expects total capex spending to continue at similar to slightly higher levels throughout 2013.

Sprint plans to cover 200 million POPs with LTE by the end of the year, which is down from its initial goal of 250 million. Euteneuer said the company remains on target for 200 million. He declined to say how many POPs Sprint currently covers with LTE, and Sprint has noted the count is difficult to obtain since the company is turning on Network Vision cell site clusters as fast as it can. Sprint first deployed LTE in July 2012.

Verizon Wireless (NYSE:VZ), which launched LTE in December 2010, said this month that its LTE network now covers 287 million POPs, making it the nation's largest LTE network by far. Verizon expects to complete its LTE buildout by the middle of the year. AT&T Mobility (NYSE:T), which launched LTE in September 2011, said it currently covers 200 million POPs with LTE and plans to cover around 270 million by the end of the year. T-Mobile USA just deployed LTE in seven markets but plans to cover 100 million POPs by mid-year and 200 million by the end of 2013.

Read more about: Joe Euteneur, Sprint
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By Phil Goldstein

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4. BlackBerry: Verizon, AT&T, Sprint and T-Mobile to carry Qwerty Q10

MetroPCS (NYSE:PCS) said that LTE subscribers now make up 39 percent of its subscriber base, an important figure for T-Mobile USA as that carrier ramps plans to merge its network with MetroPCS' network. The 39 percent figure is in MetroPCS' first-quarter results, which are its last as an independent company; MetroPCS shareholders voted overwhelmingly Wednesday to approve the company's merger with T-Mobile.

"This combination offers both immediate and long-term compelling economic value to MetroPCS' stockholders and we look forward to completing this combination on April 30, 2013," MetroPCS CEO Roger Linquist said in a statement. "As a combined company, we will create the value leader in the U.S. wireless marketplace." MetroPCS did not hold an earnings conference call. Linquist intends to retire and will not be part of the management of the new company.

For T-Mobile parent Deutsche Telekom the deal represents an opportunity to strengthen its position in the U.S. market. The new combined company will be publicly traded. However, DT cannot publicly sell shares in the company until 18 months after the deal closes. DT will own 74 percent of the new company and MetroPCS shareholders will own 26 percent.

T-Mobile's merger plan involves moving all of MetroPCS' CDMA customers off that network and onto a combined LTE network from MetroPCS and T-Mobile that would run on AWS spectrum. T-Mobile has said it expects all of MetroPCS' customers to be moved onto the new, combined network by 2015 (which T-Mobile has said will be aided by MetroPCS' 60-65 percent handset turnover rate).

Here is a breakdown of some of Metro's key first-quarter metrics:

Subscribers: MetroPCS added a net of around 109,000 subscribers in the first quarter, down from the 132,000 it added in the first quarter of 2012. MetroPCS said it ended the first quarter with a total of 8.99 million subscribers, which will be added to T-Mobile's total base of 34 million total customers. MetroPCS said that at the end of the first quarter, it had more than 3.5 million LTE subscribers, representing around 39 percent of its total subscriber base, which was an increase of 1.2 million over Dec. 31.

Capital expenditures: MetroPCS revealed in a filing with the Securities and Exchange Commission that during the first quarters it incurred $154.6 million in capital expenditures. The company had expected to incur capital expenditures in the range of $800 million to $900 million on a consolidated basis for all of 2013. For all of 2012 it incurred $845.9 million in capital expenditures.

Interestingly, the company also said that during the first quarter it closed on the acquisition of microwave spectrum for which it paid $2.1 million.

Financials: Total revenue was basically flat at $1.28 billion. The company reported net income of $19 million, down from $421 million in the year-ago period. MetroPCS said its adjusted EBITDA was $291 million, an increase of 11 percent over the first quarter of 2012.

ARPU: Metro's average revenue per user rose to $40.96 from $40.56 in the year-ago period.

Churn: The carrier's churn fell to 2.9 percent from 3.1 percent in the year-ago quarter.

For more:
- see this release
- see this SEC filing
- see this Bloomberg article
- see this Reuters article

Related Articles:
MetroPCS shareholders approve merger with T-Mobile USA
Investors begin rallying around T-Mobile/MetroPCS merger
Deutsche Telekom improves offer in T-Mobile/MetroPCS merger
T-Mobile reverses branded customers losses, posts 3,000 net additions in Q1
MetroPCS LTE subs top 3M, up from 2.2M at year-end

Read more about: LTE, quarterly earnings
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By Phil Goldstein

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5. Qualcomm posts strong quarterly results, but outlook worries analysts

BlackBerry (NASDAQ:BBRY) confirmed that all four Tier 1 U.S. carriers will launch the BlackBerry Q10, the company's first BlackBerry 10-based smartphone with a Qwerty keyboard, giving the company a boost of carrier support as it seeks to regain market share in the American market.

BlackBerry Q10

The Q10 will retail for a suggested price of $249 on contract, putting it about $50 higher than most high-end smartphones like the entry-level Apple (NASDAQ:AAPL) iPhone 5, Samsung Galaxy S4, the HTC One and even BlackBerry's own Z10 touchscreen smartphone.

"In the U.S. market, the BlackBerry Q10 is priced so it can be available at a suggested retail price of $249 on contract," BlackBerry spokeswoman Rebecca Freiburger told FierceWireless. "Carriers will confirm pricing closer to availability. We expect the BlackBerry Q10 to be available in the U.S. by the end of May."

Freiburger confirmed that Verizon Wireless (NYSE:VZ), AT&T Mobility (NYSE:T), Sprint Nextel (NYSE:S), T-Mobile USA will support the phone. Sprint had previously acknowledged its support and T-Mobile just announced that starting April 29 business customers interested in the BlackBerry Q10 can register for the phone. None of the carriers has confirmed pricing or exact availability though.

Anil Doradla, an analyst at William Blair & Co., told Bloomberg that pricing the Q10 higher than most high-end smartphones on contract is probably a deliberate effort to target business users who may be putting the phone on their expense accounts. The phone's Qwerty keyboard could also appeal more to traditional enterprise BlackBerry users than the Z10, whose touchscreen display is designed for a broad market appeal.

"They've decided this is not going to be a mass appeal phone, but one targeted at road warriors," Doradla said. "It's not the wrong thing to do."

BlackBerry will need strong U.S. carrier support to help it claw back market share. BlackBerry declined from 7.3 percent U.S. market share in December to 5.4 percent in February, according to research firm comScore.

For more:
- see this Bloomberg article
- see this AllThingsD article
- see this T-Mobile post

Related Articles:
Verizon's Z10 sales giving BlackBerry a boost, according to Chitika
Analysts: BlackBerry's U.S. Z10 sales off to a weak start
BlackBerry 7 to power new devices targeting emerging markets
BlackBerry sells 1M Z10s, but loses 3M subscribers
Report: Brightstar is mystery buyer of 1M BlackBerry 10 phones
BlackBerry Z10 sales get off to slow start at AT&T, but more U.S. carrier support coming

Read more about: BlackBerry, Sprint
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By Phil Goldstein

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