merrill lynch

Sprint's troubles inspire rumor mill

Thu, 06 Mar 2008 06:59:58 -0500

Sprint's recent troubles have made plenty of investors and subscribers uneasy, which has led to a number of acquisition-related rumors and highly speculative analysis. Here are three:

Sprint to spin-off Nextel

According to a Seeking Alpha report, Sprint Nextel has hired Morgan Stanley to implement board director Ralph Whitworth's plan to spin-off Nextel. Rumor has it the spin-off will be announced within the next two to four weeks. Most of Sprint's trouble can be traced back to the Nextel acquisition in the first place.

T-Mobile may acquire Sprint

Merrill Lynch analysts told the Kansas City Star today that Deutsche Telekom, owner of T-Mobile USA, might be considering a takeover of Sprint in an attempt to prevent a price war between the mobile carriers. Sprint's low share price and the weakness of the U.S. dollar both favor the European company, but Merrill Lynch said it is not privy to any inside information--it's just speculating.

Should Verizon buy Sprint?

Last week the Wall Street Journal's deals blog considered whether Verizon should acquire Sprint. The post brings up Verizon's stellar decision not to make a bid for Sprint back in 2004.

What do you think? Do any of these ring true?

For more on the rumor mill's field day with Sprint:
- read this post about spinning off Nextel
- check out this article about T-Mobile's interest
- read this blog post from the WSJ about Verizon

Sound Off - Industry Insiders on Unlimited Rate Plans

Tue, 26 Feb 2008 12:20:39 -0500

Here's what members of the wireless industry are saying about Verizon Wireless, AT&T and T-Mobile USA all announcing on Feb. 19 that they would offer consumers an unlimited rate plan at $99 per month. Sound off on your own opinion in our comments section below.

"We believe in unlimited. We believe we were the first with an unlimited rate plan with our My Circle 10 rate plan.

"The sweet spot for wireless voice is around $50 per month. We weren't maximizing the potential of My Circle by having entry point of $59 so we lowered it to $49. That's where the action will be." -- Frank O'Mara, chief marketing officer, Alltel

"When we announced it [the unlimited voice plan for $99 per month], we were on airwaves and on radio. We also sent out mailers about it. So our approach was 60 to 90 days in the making. We timed this to be first to market."

"There's been a lot of hullabaloo about flat rate but few customers have rate plans over $99. There is some revenue risk to some customers."

"We think that our network has significant differentiation. All carriers say that but if you talk to firms that do research, we have an advantage. We are in a greater position to attract customers in that range. The early results are great. Our stores are seeing excellent reaction to it. A couple other carriers announced unlimited plans. I suggest you go to their stores and ask what they are. They are different. The announcement was the same but they are different." -- Ivan Seidenberg, chairman and CEO of Verizon Communications speaking at a Merrill Lynch Communications conference in New York on Feb. 26.

"Unlimited is the right value proposition for us and for the customer. We have had regional players come into unlimited space in the past years but generally haven't seen the bigger carriers do it. We haven't seen this [the unlimited rate plans for $99 per month] as a particular threat because of pricing differential." -Greg Lund, spokesman for Leap Wireless.

"What we are seeing is the beginning of the flip-flopping of fixed-rate services from data to voice and the pay-for-use model being deployed in the data world. This makes a lot of sense to me since data uses a lot more bandwidth than voice and bandwidth is shared-which means there is a finite amount per cell sector.

"I think Verizon started the unlimited voice pricing high enough that it has room to move it lower in response to the pricing war this is certain to set off. In the airline business, when one airline raises a price, the other airlines match that price. In wireless, however, when a network operator lowers a price or comes out with a new plan (family plan, buddy plan, etc.) the other operators try to outdo the first operator. For example, AT&T came up with rollover minutes.

"Thus, this is only the first foray into new pricing models this industry will witness in the coming months and years. Buckets of minutes will give way to unlimited minutes, the cost for unlimited minutes will come down and we are likely to see pricing per person and per family, which will include multiple devices used by the same person or within the same family. By the way, Verizon was the first to say that this unlimited plan is probably not right for most families who share minutes and pay less for each additional device, but it might be right in some cases. That does not mean there won't be other unlimited pricing plans for families and friends in the near future." --Andrew Seybold, founder and principal of Andrew Seybold Inc.

VZW: Excellent reaction to unlimited plan

Tue, 26 Feb 2008 06:59:57 -0500

Speaking at a Merrill Lynch Communications Forum this morning in New York, Verizon Communications Chairman and CEO Ivan Seidenberg told investors that the early results from last week's announcement by Verizon of an unlimited rate plan for $99 per month have been great. "Our stores are seeing an excellent reaction to it," Seidenberg said.

He also encouraged everyone to go to the stores of competitors AT&T and T-Mobile USA to evaluate their unlimited $99 per month plans that were announced immediately following Verizon's news last week. "Go to their stores and ask what they are. They are different. The announcement was the same but they are different."

Seidenberg also said that the company had its unlimited plans in place for 60 to 90 days prior to the announcement on Feb. 19 and that's why the company was able to immediately market it to customers. "We timed it so that we were the first to market with this," he said.

But the company doesn't expect the flat-rate plan to have a lot of impact on its bottom line. "There's been a lot of hullabaloo about flat rate but only a few customers have plans over $100 per month," Seidenberg said. And he added that the company's research indicates that Verizon would be in a greater position to attract new customers at that price range with the unlimited plan. -Sue

Related stories:
Video: Carriers offer unlimited plans
Verizon goes flat-rate. Story
Flat-rate Revolution. Opinion

Amp'd Mobile tries to recoup funds

Fri, 08 Feb 2008 06:59:57 -0500

Remember when Amp'd Mobile was an MVNO with hundreds of millions of dollars in VC? After more than six months since it sold its subscribers to Prexar Mobile, the company is now looking to recover funds from at least 20 entities. Former CEO Peter Adderton is one target: Amp'd wants $1.15 million back from the executive because he "refused to perform certain aspects of his employment" and "threatened to take actions that would damage" the company. Amp'd is also looking to recoup funds from Merrill Lynch, GE Capital, Latham & Watkins, MTV Networks on Campus, Playboy and others.

Amp'd has also hired William Morris Agency, Quinn Pacific and Mosaic Capital to shop its assets, which include the company's brand, trademarks, content studio and content like "Lil' Bush."

For more on Amp'd's latest bankruptcy challenge:
- read this article from The Deal

MetroPCS sues Merrill over risky investment

Fri, 19 Oct 2007 06:59:56 -0400

MetroPCS is suing Merrill Lynch alleging that the broker invested $133.9 million of its cash in 10 auction-rate securities. Nine of the ten were issued by collateralized debt obligations, which were underwritten by Merrill. The suit charges Merrill with fraud, negligence and breach of fiduciary duty for making the risky investments.

"We believe the firm acted appropriately in its dealing with Metro PCS and made the relevant and necessary disclosures to them," Merrill said in a statement. It was "surprised" by the suit because it had been working "amicably with Metro PCS...as late as last week."

For more on the suit:
- read this article from the WSJ (sub. req.)

Virgin Mobile USA launches IPO

Thu, 11 Oct 2007 06:59:58 -0400

Virgin Mobile USA has floated 27,500,000 shares of Class A common stock priced at $15.00 per share on the New York Stock Exchange today. The shares began trading today under the symbol "VM."

Of the 27,500,000 shares, the company sold 25,467,160 shares, while the remaining shares were sold by certain stockholders. Lehman Brothers was lead manager and book runner for the offering, with Merrill Lynch & Co. and Bear Stearns & Co acting as joint book-running managers.Ã‚Â

Only about 44 percent of Virgin Mobile was floated, since Sprint is holding on to 17.2 percent and Richard Branson's group will retain 35.7 percent. The IPO price comes out to about $412 million, which is at the low range of the original estimates.

For more on Virgin Mobile's IPO:
- read this press release
- read this WSJ article

Virgin Mobile USA eyes $440M for IPO

Tue, 25 Sep 2007 06:59:58 -0400

Virgin Mobile USA announced its plans for its initial public offering: 27.5 million shares at $15-$17 each in a bid to raise up toÃ‚Â $440 million. Underwriters of the IPO include Lehman Brothers and Merrill Lynch. The company is offering 25.6 million shares of Class A common stock, while shareholders Best Buy and Sprint Ventures will sell an additional 1.9 million shares.Ã‚Â

The MVNO plans to trade on the New York Stock Exchange under the symbol "VM." For the six-month period ending in June, Virgin Mobile USA reported adjusted earnings of $29.3 million on revenue of $667 million.

Virgin Mobile USA was formed in 2001 as a joint venture between Sprint Ventures and Bluebottle USA Holdings, an affiliate of Richard Branson's Virgin Group.

For more on Virgin Mobile USA's IPO plans:
- read this article from BusinessWeek

Related Articles:
Will Amp'd ruin Virgin Mobile's IPO? Article
Virgin Mobile USA plans to generate $506M in IPO Article

Virgin Mobile USA IPO aims at $506M

Fri, 20 Jul 2007 06:59:58 -0400

MVNO Virgin Mobile USA updated its IPO plans late yesterday with a new estimated offering value of $506 million and a disclosure that Lehamn Brothers, Merrill Lynch and Bear, Stearns & Co. are underwriting. The IPO follows years of rumors about a Virgin Mobile USA IPO and it follows a successful $2.2 billion IPO from its U.K. counterpart last summer. Virgin Mobile USA is a joint venture founded in July 2002 by the Virgin Group and Sprint Nextel, both of which will retain a still-unspecified stake in the company after the offering. While most of the other details concerning the proposed IPO have yet to be ironed out, the SEC S-1 filing has revealed a plethora of information about the MVNO.

Subscribers: Virgin Mobile USA hit one million customers in November 2003, within eighteen months of its national launch. As of December 31, 2006, the company served approximately 4.57 million customers, which it estimates represented approximately a 15 percent share of the pay-as-you-go market and a 19 percent increase over the 3.84 million customers it served as of December 31, 2005. As of March 31, 2007, it served approximately 4.88 million customers. Virgin Mobile's subscriber base accounts for the majority of Sprint's wholesale customers. At the end of 2006, Sprint said it had 6.4 million wholesale subscribers. Virgin said it had 4.6 million as of late December.

ARPU: Total revenues for the MVNO totaled $339.3 million at the end of March and income came in at $36.7 million. ARPU has stayed about the same from $24.24 at the end of 2004, to $22.54 at the end of 2005 and now $22.41 at the end of Q1 this year. Non-voice services made up about 17 percent of service revenues in 2006.

Profitability: Even though 2006 sales totaled $1.1 billion, the company said it has never turned a profit. It lost $36 million last year, down from a 2005 loss of nearly $103 million. Virgin Mobile uses Sprint's wireless network and incurred costs of about $225 million for the service in 2006.

Risk Factors: Virgin Mobile has the usual rundown of risk factors for its impending IPO, like unexpected executive departures and seasonal subscriber adds, but a few stick out: Since the MVNO runs on Sprint's CDMA network, its financial performance could be affected if Sprint performs poorly. Virgin Mobile's agreement with Sprint includes one for its PCS network that expires in 2027, but its agreement with Sprint does not include future data technologies like WiMAX yet. Without these agreements, the MVNO's data offerings will remain limited. Virgin also notes that their prepaid business model might not be a strong one in the years ahead as competition from all sides of the telecom business puts pressure on the margins. Finally, Virgin Mobile has a considerable amount of debt: $531.3 million, but following this offering (on a pro-forma basis) it said debt will be $341.3 million. -Brian

For more on Virgin Mobile's impending IPO:
- see this SEC filing

Mobile ESPN to end operations

Wed, 27 Sep 2006 20:01:38 -0400

Not a shocker here. We're seeing the first high-flying casualty of the MVNO space. Mobile ESPN, backed by Disney, announced today that it is closing down operations and instead will be focusing on becoming a bigger content partner to carriers. The bottom line: Despite ESPN being one of the most well-known brands around, consumers didn't want to buy an ESPN-branded phone to access ESPN content. Will Disney, which launched an MVNO targeted at families, realize the same fate? Interestingly enough, the big brands that people thought would bring in the customers just don't cut it in the ultra-competitive mobile-phone world. Mobile ESPN teaches that it takes more than a brand.

For more about Mobile ESPN's demise:
- check out the company's press release
- check out this report from The Wall Street Journal (sub. req.)

Related articles:
- How patient will parent companies be with their MVNOs?
- Disney continues to evaluate options for Mobile ESPN
- Merrill Lynch calls for end to Mobile ESPN

Merrill Lynch upgrades RIM's growth thanks to Pearl

Tue, 26 Sep 2006 20:01:35 -0400

Analysts can't seem to say enough about the success of Research in Motion's Pearl. Merrill Lynch is the latest to give accolades. It upgraded RIM's forecasts based on the launch of the new Pearl handsets. Their analysts checked 20 T-Mobile stores in the US to find out that the new phone is selling strong following its Sept. 12 introduction. The strong sales came without any major media campaign from RIM and some stores sold out in the first week. (I ordered mine online last week and it came two days later).

To read more about Merrill Lynch's view of the Pearl:
- check out this report from cellular-news.com

Merrill Lynch to Disney: Shut down Mobile ESPN

Thu, 20 Jul 2006 20:01:35 -0400

Merrill Lynch this week issued a note to investors saying that "it is time for Disney to pull the plug on Mobile ESPN." Since its high-profile launch during Super Bowl XL, Mobile ESPN has attracted few paying subscribers. Disney CEO Bob Iger said in May that "it is clear that the jury is still out" on the future of the MVNO, but that Mobile ESPN had revamped its pricing and marketing approach. But Merrill Lynch seems to think the tweak won't be enough. The firm estimates that Mobile ESPN will attract 30,000 subscribers over the course of its financial year, well below the original estimate of 240,000. Along with the losses generated by a second Disney-branded phone service, Merrill Lynch expects Disney will lose $135 million on its experiment in fiscal year 2006. Mobile ESPN says it doesn't have any plans to end service.

As one analyst pointed out to me, Mobile ESPN could turn into a very interesting brand/content MVNO case study down the road.

To read more about Merrill Lynch's views on Mobile ESPN:
- check out this article from Mediaweek

SPOTLIGHT: Merrill Lynch expects strong net adds in Q2

Thu, 29 Jun 2006 20:01:25 -0400

Merrill Lynch analysts have concluded another trek to U.S. phone and network retailers to determine how strong net adds are going to be in the second quarter. Lynch says volumes appear healthy for the quarter, with Verizon Wireless continuing to grab share across the board and Cingular performing well. Alltel also looks like it has some momentum. And Merrill Lynch believes T-Mobile is going to come up short on subscriber additions. The firm estimates that subscriber growth will slow, from 25.5 million net additions in 2005 to 23 million in 2006, for an ending subscriber growth rate of about 11 percent year-over-year and 77 percent penetration. Article

NTP, RIM reject each other's proposed settlements

Sun, 11 Dec 2005 19:01:37 -0500

NTP served up an unsavory settlement solution that called for 5.7 percent of the BlackBerry service's expected revenue through 2012, the year NTP's patents expire. Merrill Lynch estimated that a royalty with that rate could cost RIM up to $900 million. NTP said that they proposed the 5.7 percent royalty settlement to RIM, but RIM refused and countered with their own offer that NTP deemed unacceptable. NTP would not discuss RIM's offer but said the two companies aren't close to making a deal. NTP co-founder Dennis Stout said that the settlement amount would exceed $450 million, the sum that the two companies had discussed as a settlement price last spring.

RIM is in jeopardy of having to stop service to BlackBerry users in the US pending a court ruling, but the company claims to have developed a solution that works around NTP's patents. RIM has not commented on the settlement situation.

For more on the NTP, RIM saga:
- take a look at this article from The Wall Street Journal (sub. req.)

Trend: Is Verizon Wireless gaining on Cingular?

Thu, 23 Jun 2005 20:01:37 -0400

Analysts at Merrill Lynch believe Verizon Wireless is taking market share from US market leader Cingular Wireless. The analysts speculate that Cingular has upset many AT&T Wireless subscribers by charging them an $18 migration fee. The analysts also predict that some Cingular customers are frustrated that their coverage has not yet improved, contrary to Cingular's marketing. Verizon Wireless, meanwhile, has stayed focused on growing its subscriber base and expanding its 3G network.

For more on the Verizon Wireless, Cingular analysis:
- check out this piece from cellular-news