Thursday, August 19, 2010

Less Roaming Means Less Profit

One of the financial and operational objectives in the acquisition of cellular carriers is the reduction in roaming fees one carrier pays to another. On the surface that appears to be a good thing. Earlier this week, US Cellular's stock was downgraded as a result of the acquisition by Verizon Wireless of most of the Alltel properties.

With Verizon now paying fewer roaming fees, US Cellular has taken a hit by collecting fewer fees from Verizon and Alltel. This is great for Verizon, but it's just one more thorn in US Cellular's side that could force them to throw in the towel. We don't want that.

Have you noticed now that Verizon is no longer paying roaming fees to Alltel, US Cellular and others, how much cheaper your Verizon rate plan is? Of course not! The money saved is going to Verizon's bottom line, not yours. Will US Cellular's reduction in roaming income mean they'll charge higher rates? Maybe.

The big picture centers on corporate profits. We don't see any of the savings, but losses may mean bye-bye to a carrier. US Cellular needs to scramble to keep their head above water and what they make from data and prepaid phones may be all that's left between them and an exit from the business. Stockholders are asking US Cellular to sell...but to whom? Not many carriers need them. It's time for the #6 carrier to think creatively. It's what keeps the wolf from the door...or the Cricket.

1 comment:

CookieMonster said...

It's getting to the point that US Cellular really needs to merge with Sprint. Actually, an amalgam of Sprint, US Cellular, Cellular South and ATN could pose a nice foil to the at&t.VZW duopoly...