RadioShack: T-Mobile USA has 'materially breached' contract

RadioShack said T-Mobile USA "materially breached" the companies' contract, and RadioShack is working with the carrier on a remedy. The turmoil underscored a weak fourth quarter for RadioShack, which blamed its results, in part, on weak sales of T-Mobile phones.

The retailer declined to say in what way T-Mobile breached the terms of the contract. "We can't discuss the details of the legal discussions that are underway or what the breach involves, but our conversations continue to be constructive and we hope to have a resolution as quickly as possible," Eric Bruner, a RadioShack spokesman, told FierceWireless.

RadioShack and T-Mobile entered into a deal in July 2009 that doubled the number of retail outlets selling T-Mobile products, and made RadioShack T-Mobile's largest retail partner. RadioShack made it clear it was disappointed with how T-Mobile's products had performed at its stores. "During the quarter, we struggled with T-Mobile's product offerings not being competitive with other carriers," CFO Jim Gooch said on the company's earnings conference call. Gooch will take over as CEO in May when current CEO Julian Day retires.

"Our priority for 2011 is to continue to make operational improvements that enhance our mobility, innovation and service offerings for customers," Gooch added. "Despite the disappointing performance of our T-Mobile postpaid business in the fourth quarter, we strongly believe mobility products are the cornerstone of our future."

This isn't the first time RadioShack has had public disagreements with a wireless carrier. The retailer stopped selling Verizon Wireless service in 2005, only to add the carrier back into the mix in 2009.

In other RadioShack action, the company said in January its contract to operate 417 cell phone kiosks inside Sam's Club stores will end and that Sam's Club plans to take over management of the kiosks. The transition likely will be complete by June 30. Thus, RadioShack said it likely will see its kiosk profits decline by $10 million to $15 million this year because of the shift. However, the company is trying to make up for its losses by ramping up its wireless efforts in Target stores. RadioShack said it will double its presence in Target stores, from about 850 stores today to 1,450 Target stores by June 30. The company has been operating the wireless department of many Target stores since November 2009.

For the fourth quarter, RadioShack reported a net profit of $57 million, down from $75.7 million in the year-ago period. The company said revenue increased 3.8 percent to $1.37 billion in the quarter.

For more:
- see this WSJ article (sub. req.)
- see this Reuters article
- see this TheStreet.com article

Related Articles:
RadioShack losing Sam's Club kiosks, but expanding in Target
RadioShack's Q3 earnings spike 23% on higher wireless sales
Target teams with RadioShack on mobile retailing business
Target outsourcing mobile retailing biz to RadioShack
RadioShack takes iPhone nationwide
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