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Sprint Corporation Message Board

  • elwood_calif elwood_calif Sep 22, 2009 11:33 PM Flag

    Why the buy-out target is Sprint...

    Message is from oceanfront4me...forced to use a friend's i.d. because I keep getting a 999 error message:


    One more time...for the new investors evaluating Spring stock...

    BTW...be sure to click on the link at the end of this post to read a more complete analysis that takes into account the September 4th call options activity, etc.


    Here we go...

    The fastest growing market in cellular phone service is the pepaid (as opposed to contract/post-paid) customers. And Yes, I realize the profit margin per customer is less for prepaid as opposed to contract customers...but the fact that the prepaid market is exploding while the total pool of contract customers is contracting...makes for the imperative that the companies below:

    (who currently compete against each other for PREPAID customers and are known for being PREPAID cellular phone service providers)

    1. grab as much of the pre-paid market as possible. (market share)

    2. cut their cost per customer and accordingly increase their margin.


    The 5 companies fighting for a larger share of the prepaid pie are Boost Mobile(owned by Sprint), Virgin Mobile, (recently acquired by Sprint), T-Mobile (Deutsche Telekoms U.S. subsidiary), Metro PCS, and Leap Wireless.


    On July 29th, 2009, Sprint announced that it was buying Virgin Mobil. (BTW...a class action law suit was filed by Virgin shareholders against the Virgin Board of Directors...alleging that Sprint got too good of a deal...i.e.--did not pay enough. :)


    Why did Sprint buy Virgin Mobile, a PREPAID cellular service provider?

    ANSWER:
    See #1 above...the fastest growing market is Prepaids...Virgin is an iconic brand...Sprint wants a larger share of the prepaid market...which is GROWING, as contract customers "defect".

    And see #2 above...the combination will allow Sprint to cut their cost per prepaid customer and accordingly increase their profit per prepaid customer...or put another way... it will lead to a higher profit margin on their prepaid business as opposed to the profit margins of Leap Wireless, Metro Pcs, and T-Mobile.

    Yes...the profit per customer is less on prepaids than contract plans...but read the 1st paragraph...if it's the fastest growing market (driven by cost conscious consumers or the desire not to be tied to a contract), and the purchase of Virgin Mobile allows Sprint to attract more of that migration from contract to prepaid as well as lower their cost per prepaid customer. (economies of scale)

    Continued at next post...

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    • Hmmm! Interesting concept: "using my friend's ID as I can't post using mine" - like a Nigerian scam artist, eh?

      AND - using other Board members who've posted on this forum as, "authoritative sources" - but, of course, only when they agreed with you!

      AND - citing blogs that spout such misinformation as, "T-Mobile's customer based is primarily PREpay..." as proof of your contention that Virgin and Boost're going to save Sprint...

      PRICELESS!

    • You get the 999 message from flaming liberal Obama loving Yahoo because they censor anything they don't want posted on posting board. Yahoo needs to be invetigated by SEC and kept from running the company like Hitler.

    • continued from previous post above...


      That move (Sprint buying Virgin Mobile) put immediate pressure on Deutche Telekom's U.S. subsidiary, "T-Mobile".

      How?

      Sprint's Prepaid Division...now consisting of Boost Mobile AND Virgin Mobile...can now operate with better margins/profit per customer leading to aggressive pricing, etc.

      T-Mobile was already operating at a disadvantage with respect to Sprint as they have an inadequate 3-G network, as evidenced by the following quote/link:

      "The US operation is struggling to compete against larger rivals AT&T and Vodafone's 50pc-owned joint venture Verizon Wireless, WHICH HAVE MORE ADVANCED 3-G NETWORKS. (I added the caps for emphasis) T-Mobile US is also losing customers to small operators offering cheap deals."

      which came from the following article:
      http://www.telegraph.co.uk/finance/newsb...

      T-Mobile has far fewer customers than Verizon, AT&T, and Sprint. They need to purchase a U.S. cellular phone company in order to spread their fixed costs (network and marketing costs, etc.) over a larger subscriber base.

      If they buy Sprint...they solve their inadequate network problem. They wanted Sprint last year (May 4th Wall Street Journal article) but the money dried up in the great "collapse". (S & P 500 lost 900 points between October of 2007 and March of this year) The bankers are lending on M&A deals now...and Deutsche Telekom is back to buy Sprint at a time when the Sprint price per share is 1/2 of what is was last May.

      The reports that Deutsche is looking at other companies is a smoke screen. See my post from earlier today re: the financial BLOG that reported (yesterday) that Deutsche was eyeing Metro PCS...which caused the Metro PCS share and call options prices to spike and before the end of yesterday's trade...to come right back down.

      Deutsche to solve their inadequate network problem by purchasing an interest in Clearwire?? More smoke screen. Sprint owns 51% of Clearwire. Why would they do something inimical to their own interests?

      And basher mrc0516 (who, in my opinion, is employed by Deutsche Telekom to keep the share price down until they acquire Sprint...see my earlier posts), I don't care if that interest was paid for in cash, stock, notes, future contributions of capitall or services or whatever. The reason why it's 50 +1 percent interest is so that it would be a CONTROLLING interest...as was pointed out to you by an earlier poster today...in response to your ludicrous statement that an investment by Deutsche in Clearwire would be conditioned on the Sprint CONTROLLING interest being reduced.

      When will the announcement come? Before October 16th...the expiration date of the October call options. (see earlier posts re: the inordinate activity in those calls on September 4th) When? Per the British Telegraph (newspaper that broke the news that Sprint was back), within "a few weeks"...of the date the story was published...September 12th.

 
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