Cellphone centers’ profit is a hang-up

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Retail cellphone stores are losing profitability because of a decline in new customers, and at least one adviser recommends hanging up on the stocks of at least two of the four major U.S. carriers.

The cellphone market is tapped to near-capacity, and relatively few cellphone-users jump from one carrier to another, says Robert J. Fuest of Landor & Fuest Capital Managers. Retail outlets have become service centers that sell equipment and renew accounts, but don’t generate revenue, he says.

“The national carriers would likely be better suited ridding themselves of these centers” and selling their equipment through big-box retailers, he says. He gives a thumbs-down to AT&T (NYSE: ATT; Price: $26.63) and Sprint (NYSE: S; Price: $4.91). He’s watching Verizon (NYSE: VA; Price: $28.78), after its late June announcement of its joint venture on smartphones that use the Android operating system with Adobe, Google and Motorola. He also says T-Mobile USA (a subsidiary of Deutsche Telekom [OTC: DTEGY; Price: $11.59]) might benefit from a small gain in international market share from buyers who buy more prepaid phones, which is the fastest growing market.