RadioShack Bolsters Wireless Focus With Verizon/Sam's Deal
September 29 2009 - 5:07PM
Dow Jones News
RadioShack Corp.'s (RSH) addition of Verizon Wireless to 450
kiosks it operates in Sam's Club stores bolsters the consumer
electronics retailer's focus on its key wireless business, though
it isn't expected to have a material impact on financial
results.
At this point, it also doesn't appear to signal a warming
relationship between RadioShack and Verizon, which parted ways in
2005 as RadioShack switched to carrying AT&T Inc. (T) wireless
plans.
RadioShack shares rose 3.4%, to $16.86 in recent trading.
RadioShack late Monday announced the addition of Verizon phones
and plans to the Sam's Club-branded kiosks, effective Thursday.
"With the addition of Verizon to our kiosk operations, we've
established important relationships with all four major wireless
carriers in the United States," RadioShack Chairman and Chief
Executive Julian Day said in a statement.
Wireless phones and services generate about a third of
RadioShack's sales. The retailer's primary wireless partners in
recent years have been AT&T and Sprint Nextel Corp. (S).
But the Fort Worth, Texas, company began offering T-Mobile plans
and phones in its 4,450 company-operated stores in August.
Launching a new marketing campaign last month that emphasizes
cellphones, RadioShack executives said they're going to continue to
build the retailer's business around mobile products and the mobile
lifestyle.
Verizon Wireless is a joint venture of Verizon Communications
Inc. (VZ) and Vodafone PLC (VOD) and is the largest U.S. wireless
carrier by subscribers. T-Mobile is a unit of Deutsche Telekom ADR
(DT).
RadioShack representatives didn't respond immediately to
requests for additional comment.
A Verizon spokeswoman said the agreement is part of the
carrier's ongoing efforts to reach more customers and noted the
kiosks, operated by RadioShack subsidiary SCK, don't carry the
RadioShack brand.
"Our strategy is to be where our customers shop," said
spokeswoman Brenda Raney. Asked if the deal signals a step toward a
broader relationship, she said, "You should take this for what it
is: A relationship with SCK."
Morgan Stanley analyst Gregory Melich said the Verizon
arrangement is a positive.
"Adding Verizon to Sam's Club kiosks should help, on the margin,
to stabilize wireless activations," Melich said in a note to
clients.
FBR Capital Markets analyst Stephen Chick said the agreement is
"a subtle sign that they're working on everything wireless."
"They're obviously very focused on it," he said.
RadioShack also operates 135 kiosks on behalf of Sprint Nextel,
but the companies in April agreed to cease the arrangement, and
RadioShack plans to transition them to the RadioShack brand.
The third-party kiosks, generally about 99 square feet large,
generated less than 7% of RadioShack's revenue and less than 3% of
operating income in 2008, and both percentages declined from
2007.
"It's pretty small," Schick said of the kiosk business.
RadioShack in 2004 purchased the rights to operate wireless
kiosks in Sam's Club for five years, and the two retailers in
February agreed to extend the agreement through March 2011.
Separately on Monday, RadioShack said holders of its 7 3/8%
notes due 2011 tendered only $43 million of $350 million
outstanding under the company's cash tender offer, which expired
Monday.
Schick and Melich said they expect RadioShack might use the cash
originally intended for the tender offer to boost its share
repurchases.
-By Mary Ellen Lloyd, Dow Jones Newswires, 704-948-9145;
maryellen.lloyd@dowjones.com