A Foolish Week of Telecom

Dan Radovsky, The Motley Fool

Dan Hesse, CEO of Sprint Nextel (NYS: S) , had to pay a sky-high subsidy for his iPhone. His reward for bringing the iPhone to the No. 3 mobile carrier was to have his pay docked by $3.25 million.

Hesse had said that one of the biggest obstacles to bringing in more customers to Sprint was that the carrier didn't offer the iPhone, a huge handicap in trying to win customers away from rivals AT&T (NYS: T) and Verizon, carriers that did offer the iPhone.

The big problem for Sprint -- and Hesse -- was that to get the iPhone, the company obligated itself to Apple (NAS: AAPL) for four years and $15.5 billion. Hesse rationalized this huge deal by comparing the iPhone to a superstar baseball player being signed to an Alex Rodriquez-sized contract to bring fans into the stadium.

"iPhone has an expensive contract, but he's worth every penny," Hesse said.

Merger rumors du jour
Reuters has reported that AT&T and Leap Wireless had been holding talks recently regarding Leap's purchase by AT&T. Leap had hired bankers to advise it on the deal, according to three Reuters sources who wish not to be identified.

And what's this? So soon after Sprint's secret talks to buy MetroPCS (NYS: PCS) were for naught when Sprint's board overruled CEO Hesse's takeover deal, MetroPCS is in another alleged merger talk -- this one with T-Mobile. All T-Mobile CEO Phillip Humm would say is that his company won't comment on this rumor.

T-Mobile is the fourth-largest U.S. wireless carrier, with three times as many customers as the fifth-largest, MetroPCS.

Clearwire, at a shopping mall near you
(NAS: CLWR) wanted there to be no mistaking its intentions regarding its retail wireless business. Clearwire Senior Vice President Dow Draper told an audience at the CTIA Wireless show in New Orleans that Clearwire's "retail business is alive and well."

Most attention lately has been on Clearwire's wholesale operations, especially in regard to its on-again, off-again relationship with 4G WiMAX network partner Sprint. Clearwire news has also been focused on whatever progress it makes in the buildout of its 4G LTE network.

Will Clearwire ever offer LTE to its retail customers? "When it makes sense to add LTE to the retail mix, we'll do that," Draper said.

No strings attached
Indications are that wireless customers are opting out of signing long-term contracts with their carriers. The Associated Press has reported that the seven largest U.S. wireless carriers lost a combined 52,000 subscribers in the first three months of this year.

But those people aren't throwing their mobile phones away. They're choosing to go with month-to-month plans. No-contract subscribers grew by at least 2 million in that period.

The big boys aren't ignoring this trend and are jumping right on into the no-contract fray. This should be causing the traditional month-to-month players -- MetroPCS and Leap -- some sleepless nights, and it may be providing some impetus for those rumored merger talks I mentioned.

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At the time thisarticle was published Fool contributorDan Radovskyowns shares of AT&T. The Fool owns shares of Apple.Motley Fool newsletter serviceshave recommended buying shares of Apple and creating a bull call spread position in Apple. The Motley Fool has adisclosure policy. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days.

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