In an attempt to revive its declining postpaid business, small
United States Cellular Corp.
) has tied up with
) to sell the latter's iPhone starting this year.
Though U.S. Cellular has not divulged the date and the
specifications of the model, the fifth-largest U.S. carrier
promised to buy $1.2 billion worth of iPhone over a period of
three years. U.S. cellular is the only major U.S. wireless
carrier that does not offer the
Previously, U.S. Cellular had rejected the offer to sell the
iconic smartphone as it believed that the phone is too expensive
in comparison to other smartphones and the carriers will have to
absorb a lot of cost in the form of subsidies.
However, the absence of iPhone has impacted U.S. Cellular
badly as it continued to face customer churn and lost 268,000
customers or 5% of its contract-based customers in the last 18
months. In its recently concluded quarter, U.S. Cellular, a
Telephone and Data Systems Inc.
), missed the Zacks Consensus Estimate on both the fronts.
Added to the iPhone woes the company faces major competition
from all the remaining four major U.S. carriers that have been
offering contract-based iPhones for the last four years.
Significantly, U.S. Cellular's nearest rival,
T-Mobile US Inc.
) started selling the no-contract iPhone range from its stores
U.S. Cellular exited the first quarter with a retail customer
base of 5,225,000 and has lost 32,000 postpaid customers.
However, Smartphone sales remained strong and represented
approximately 62% of all sold devices. Further, 76% of the
smartphone sales were driven by 4G devices. This shows that the
demand for smartphone remains strong in the U.S.
Meanwhile, the Chicago-based company expects to cover almost
87% of its customers with 4G LTE by 2013 and is also expanding
its network capacity. We believe that the iPhone launch
together with the network expansion bodes well for U.S. Cellular
and will allow the company to boost its top line. Nevertheless,
the high burden of subsides remains the short-term concern which
could impact the telecom operator's margins.
Currently, U.S. Cellular holds a Zacks Rank #3
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