How Do These Phone Companies Line Up?

Phillip is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Making the decision about which phone company is best for you to invest in depends on a few factors. First, it is important that the company is able to attractively price its services. Second, the firm needs to offer quality connectivity. Third, the company needs to be innovative. Let's see where these three businesses line up.

Sprint finishes takeover

Now that Sprint (NYSE: S) has finished its nearly $22 billion takeover of America's largest wireless carrier, it is truly a monster. It now controls about 78% of the former Sprint Nextel network and is now dubbed Sprint Corporation. I think this move puts the company in a competitive position to become a major mobile competitor. 

Not long after the takeover, Sprint announced a new pricing plan that I think will drive the company to major profits. The new plan allows customers to have unlimited use for a set rate. This is an improvement compared to what AT&T (NYSE: T) and Horizon have been doing. Those companies have added a slew of fees which will likely turn customers off, placing those customers securely on Sprint's client list. 

AT&T has some advantages

AT&T has a superior LET network. This is one of the three most important factors for customers, along with screen size and battery life. Despite the superior LET, the firm may need to think again about the fees that it has added. After all, once Sprint is able to catch up to its LET network then AT&T's competitive advantage will disappear.

AT&T could benefit from its innovation, however, which is a key factor at any technology firm. The company recently announced that it would team up with Sirius XM Radio, to provide a telematics offering in Nissan cars. As vehicles become more fully integrated with gizmos and gadgets, companies that are able to make headway in that development will realize major profits. AT&T certainly sees this, and the partnership both diversifies the company and positions it for stellar profits in the years ahead. As AT&T executive Glenn Lurie put it in a press release, "Your future car is going to be a smartphone with four wheels with powerful capabilities specifically built for a safe and enhanced customer experience."

Verizon's new program is on the horizon

Verizon (NYSE: VZ) is another innovative telecommunications company that is worthy of close inspection. The firm recently announced that its new Edge program is official, and this could attract a massive number of new customers. Edge doesn't require clients to sign a contract, and as with Sprint carries no activation fees. Furthermore, the company offers a payment plan so that customers can finance their devices.

With the new plan launching at the end of August, now could be a good time to get in before the masses catch on to this new offering. Verizon will very likely advertise the new program soon, and that is not only advertisement for people to use the company for its phone plan but also for potential investors who will likely drive up the share price.

Two of these three are more attractive

In the telecommunications business, the company that provides the greatest ease of use for its customers that will come out on top. It isn't always possible for these firms to offer their service without the fees that customers love to hate, of course. In order for these companies to offer the most competitive prices without activation fees and contracts, they need to have a favorable return on equity.

The moves by Sprint and Verizon to make their offerings more attractive by getting rid of fees and contracts tells me these firms are strongly positioned and worthy of consideration for your portfolio. AT&T may have to follow suit once these companies catch up in their ability to deliver high-quality service via an LET network.

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Phillip Woolgar has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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