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U.S. Cellular Unveils New Samsung Galaxy Tab

Zacks Equity Research

United States Cellular Corporation (USM), the subsidiary of Telephone & Data Systems Inc. (TDS) has recently launched Samsung Galaxy Tab 4 10.1. Based on Google Inc.’s (GOOG) Android operating system, Galaxy Tab 4 10.1., will be available in U.S. cellular stores. The new device is an attractive addition to the company’s device line-up. Moreover, it will expectedly attract more customers. 

U.S. Cellular is optimistic about the growing demand for smartphones, which enjoys a market penetration of 53%, supporting growth in data revenues.  The company expects equipment pricing to remain competitive, given the increasing number of smartphones in the market, which lowers the cost of equipment selling. In addition, the recently rolled out device installment plan is expected to offset losses on smartphone subsidies. Smartphone sales represent approximately 85% of equipment sales, with 82% of the smartphones being 4G devices. Further, the launch of Apple Inc.’s (AAPL) iPhone in fourth-quarter 2013 has enriched the company’s portfolio and widened the range of choices for customers.  

To increase smartphone penetration, the company initiated Shared Data plans for consumers and business, starting at $40 per month, which is generating a favorable response from customers.

In 2013, to increase smartphone penetration in the prepaid market, U.S. Cellular offered its “U Prepaid” service across 400 selected outlets of Wal-Mart. We believe that the long-term higher ARPU from smartphone users and the full utilization of LTE network capacity by migration of customers from 3G to 4G networks will mitigate the operating cost headwinds originating from higher subsidies on smartphones. U.S. Cellular has lowered the cost of Shared Connect plans for customers who either bring their own device or opt for the company’s recently launched device installment plans. The company’s new family and business plans are aimed to help it compete with peers like Verizon and AT&T. The carrier has admitted that it will continue to adjust pricing to provide the best network services at a competitive rate.

At present, U.S. Cellular has a Zacks Rank #3 (Hold).

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