NetZero Wireless signs MVNO pacts with Verizon, Sprint

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NetZero Wireless is expanding beyond its initial Clearwire WiMAX footprint via new mobile broadband wholesale agreements with Verizon Wireless (NYSE:VZ) and Clearwire parent Sprint (NYSE:S).

Mark Goldston, United Online

Goldston (Image source: United Online)

United Online, parent of NetZero Wireless, made the announcement in conjunction with the release of its second-quarter 2013 financial report.

"We have signed a three-year agreement with Verizon to offer the NetZero mobile broadband service on Verizon's nationwide 3G network. When the service is launched, we expect NetZero mobile broadband will be available in approximately 500 markets and cover more than 300 million people, or approximately 95 percent of the entire U.S. population," said Mark Goldston, chairman, president and CEO of United Online.

"Also, we have signed a five-year agreement with Sprint to offer the NetZero mobile broadband service via Sprint's 4G LTE and 3G networks. This agreement will allow us to expand our NetZero mobile broadband coverage to a projected 200 million people in 2014 on the Sprint 4G LTE network," he added.

Goldston told financial analysts in a conference call that Clearwire's footprint only extends to about 40 percent of the U.S. population. "Currently, a large number of calls we receive for the NetZero mobile broadband service everyday are from people outside of our Clearwire coverage area. So we're simply losing the ability to sign up many of the inbound callers we get every day because of that," Goldston said, according to a Seeking Alpha transcript of the call.

"At our current conversion rates, our NetZero mobile broadband sign-ups could significantly increase without any additional marketing spend as a result of these two landmark agreements that we've signed, which, in addition to Clearwire, will give us a great coverage footprint," he added.

The expanded service should be available in 2014's second quarter, Goldston said.

United Online's mobile broadband business counted 41,000 accounts as of June 30, a flat result from the previous quarter. Goldston noted that many subscribers who signed up last year for the first-year-free promotional plan churned upon reaching their one-year anniversaries.

However, the company has been able to move many NetZero mobile broadband subscribers to higher price points. In 2013's second quarter, 89 percent of new mobile broadband subscribers signed up for $19.95 or higher price plans, up from 58 percent in the first three months of 2013.

United Online provides Internet access, runs e-commerce sites and operates flower-delivery companies. Its primary communications segment service is Internet access (NetZero and Juno), including NetZero mobile broadband (NetZero Wireless). United Online's content and media segment provides online nostalgia products and services (Classmates and StayFriends) and online loyalty marketing (MyPoints).

In consolidated results, United Online reported second-quarter 2013 net income of $15.7 million, slightly down from the $16 million reported one year earlier. Revenue slid 4 percent to $221.7 million.

The Woodland Hills, Calif., company said investment in its NetZero mobile broadband business resulted in a negative adjusted OIBDA impact of $1.8 million during the second quarter of 2013, compared to a negative adjusted OIBDA impact of $4.0 million in the year-ago quarter. Goldston said United Online is focused on seeing the mobile broadband business turn profitable in 2014.

A tax-free spinoff of United Online's flower-delivery unit services (FTD, Interflora, Flying Flowers, and Flowers Direct) is slated for the third quarter. After the spin-off of FTD, United Online will consist of its content and media and communications segments.

For more:
- see this United Online release
- see this Seeking Alpha transcript (sub. req.)

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