Barron’s: Gravitational Shift in Wireless, Thomas Hazlett

barronsgravitationalshift

Competition in mobile phones has supplanted competition among networks.  In August 2011, Sprint Nextel jubilantly announced that it would offer the iPhone 4 on its network. This was supposed to be good news, for Apple lovers would surge onto Sprint’s network and pay monthly fees for access. But Sprint’s share price tanked 10% on the announcement.  Why the long faces, Sprint shareholders? Your nationwide mobile network, with tens of thousands of base stations and 50 million subscribers, should be a treasure trove for Apple. How much would Apple pay for access to Sprint’s army of wireless warriors eager for iPhones and iPads?  Nothing. Less than nothing, actually. To land the iPhone, Sprint (ticker: S) committed itself to buying 30.5 million units by 2015 for about $675 each. On just this sale, Apple (AAPL) will add gross profits equal to $15 billion. Sprint’s whole market cap is $8 billion. The telecommunications industry’s center of gravity has shifted. The edge is squeezing the core.

Link to Barron’s article.

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Dr. Thomas W. Hazlett, Director

Director, Information Economy Project and Professor of Economics, Clemson University, 864-656-3430, hazlett@clemson.edu. Thomas W. Hazlett is Professor of Economics and...

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