Western Union Drops After Verizon Announces Wireless Payments and Transfers

Western Union shares fell 5.5% Wednesday after Verizon Wireless announced subscribers would soon be able to transfer funds and pay for purchases using their cell phones. Verizon said it was partnering with Obopay Inc.; purchases and transfers will be charged against a prepaid Obopay Mastercard. Users will also be able to check account balances, view transaction histories, and collect money from other mobile users. Western Union spokeswoman Sherry Johnson called the new technology "interesting" and said the company was looking at implementing its own version of mobile money transfers. UBS analyst Adam Frisch said in a research note that the move may signal increased competition in the future: "If this announcement makes other carriers announce similar deals, then it could be a very challenging time for traditional" companies such as Western Union. The Wall Street Journal reports that investment firm Morgenthaler Ventures is expected to announce Thursday it will back the U.S. subsidiary of Korean Danal Co., which lets users pay for shopping with their cell phones. Research firm Celent LLC says global mobile commerce will hit $55 billion in 2008, up from $24B in 2006. Separately, Wal-Mart announced Tuesday it will open financial-service centers in 1,000 stores by the end of 2008. Wal-Mart charges about 50% less for services like check-cashing -- likely bad news for Western Union and competitors like Moneygram International and First Data.

Sources: Verizon press release, Denver Post, BusinessWeek, Wall Street Journal
Commentary: Western Union Is Ready To Roll • Western Union: Like Wiring Money Into Your Portfolio • Western Union Wired for Growth -- Barron's
Stocks/ETFs to watch: The Western Union Co. (WU), Verizon Communications Inc. (VZ), Moneygram International Inc. (MGI), First Data Corp. (FDC), Wal-Mart Stores Inc. (WMT)
Related: Obopay website

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