MetroPCS Communications Inc.
(
PCS
), one of the leading prepaid operators in the U.S., is expanding
its 4G portfolio with the launch of China-based telecom solutions
provider Huawei Technologies Co Ltd's Activa 4G LTE device for all
its customers. We believe that this is an attempt to compete with
the continuous launch of smartphones at affordable prices by its
rivals.
Although, Activa 4G is Huawei's first 4G LTE offering in the
U.S. market, it's the fourth of its kind from MetroPCS's stable.
The smartphone comes at a price tag of $149.99, which makes it the
cheapest LTE offering from the company. The feature rich device,
which runs on
Google Inc's
(
GOOG
) older version of Android operating system, comes with a 5
megapixel camera along with single LED flash and a front facing VGA
camera. The most significant part of the agreement is that it comes
without a contract unlike other high-end phone offerings from
postpaid carriers.
The launch is significant for both the companies. The agreement
will help Huawei to improve the sales of its high-end smartphones
outside its home market. On the other hand, Metro PCS Communication
customers will benefit due to the availability of feature rich 4G
LTE devices at attractive price points.
Recently, rivals
Leap Wireless International Inc
(
LEAP
) and
Sprint-Nextel Corp
(
S
) have launched a pre-paid version of
Apple Inc's
(
AAPL
) iPhones at attractive price points. Moreover, they are also
offering the service without any contract coupled with unlimited
data usage.
We believe that the growing attractiveness of the prepaid market
based on its no contract advantage along with competition from
other pre-paid carriers has forced MetroPCS Communication to come
up with such an offering. Additionally, the higher data
transferability of LTE technology will increase the demand for LTE
devices, which in turn can help MetroPCS Communication.
Recommendation:
We are maintaining our long-term Neutral recommendation on
MetroPCS Communication Inc. Currently, MetroPCS Communication Inc.
has a Zacks #4 Rank, implying a short-term sell rating on the
stock.
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