MetroPCS (PCS +19.7%) and Leap Wireless (LEAP +17.4%) soar on a Bloomberg report that Deutsche...

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edfromphilly Comments (6)
 
Sell T-Mobile, IPO T-Mobile, or Buy a Little carrier in trouble. Isn't earnings tomorrow?
9 May 2012, 01:23 PM Reply Like

catamount Comments (374)
 
PCS is in trouble? Please explain (after reviewing their balance sheet).
9 May 2012, 02:40 PM Reply Like

edfromphilly Comments (6)
 
Just referring to rumors. The low end needs consolidation and S is the one to do it. The idea of Tmobile buying any prepaid carrrier will makes things worse for both. There is Increasing Compitition in the prepaid space. $35 to $45 plans coming from Virgin/Boost with heavy subsidy, along with bring your own device offerings from Straight Talk and Simple Mobile launched recently. Voice and data are comoditized on the low end. That is pcs's bread and butter. They have to move up market now to maintain customers, but that won't start till q4 and may push cpga above 250 to 275 partially because of lower volumes. They need to sign a wholesale deal with Clear to improve coverage and capacity and until they do they are looking for a buyout from S. I believe it will happen in q3 or q4. The TMO rumor just made me laugh with earnings today and saying TMO will merge and sell the company. Even Leap rallied and nobody wants that company.
10 May 2012, 08:34 AM Reply Like

skibimamex Comments (277)
 
PCS is extremely well managed and Linquist has great strategic vision. That is why PCS itself has recognized that it is in trouble, by either pursuing (in the case of Sprint) or responding (in the case of TMUSA) seriously in considering strategic consolidation, because it knows that the path of independence is not viable long term. PCS' business has fundamentally changed from a voice-centric model, where it enjoyed significant competitive cost advantages, to a new data-centric paradigm where Metro is sub-scale and spectrum deficient to manufacture bits at a competitive and cost-effective delivered cost. Data usage per sub shortly will end up consuming multitudes (some engineers estimate 5x+) of bandwidth than traditional voice-only customers use, and while the ARPU is higher, it comes nowhere near the multi-fold accretion in network cost of service. PCS dilemna is even worsened becasue if you have to throw capex dollars at the capacity problem that to overcome limited spectrum, not only is this multiples of capex, the resulting higher recurring operating expense from more cell sites makes that expense recurring. The challenge is that there is no good solutions (in terms of spectrum) to solve its problem. So edfromphilly is absolutely correct: the iceberg is dead ahead on the horizon and the ship's steering mechanism is stuck, however, PCS management is taking proactive measures to try to abandon ship in as orderly a process as possible.
10 May 2012, 09:54 AM Reply Like