RadioShack Dumps Verizon For Cingular
In a surprising move, RadioShack announced that it was ending its five-year relationship with Verizon Wireless late Sunday, opting instead to sell Cingular Wireless at its more than 5,000 retail locations starting January 1, 2006.
The electronics retailer also announced that it had extended its partnership with Sprint to continue selling wireless for the company, as well as introducing Nextel pending regulatory approval.
The contract with Cingular is valid through 2015, and Sprint and Nextel through 2016.
In a conference call Monday afternoon, RadioShack executives cited greater reach into the lucrative wireless industry through the new deals. 28 million of the 70 million upgrades and subscriber additions each year are done in retail locations other than the carriers themselves.
Had RadioShack continued to sell Verizon Wireless and Sprint alone, they could only reach 9 million potential customers, while a combination of Cingular, Sprint and Nextel could reach up to 16 million potential customers, company executives said.
RadioShack wanted to offer consumers a greater choice in carrier. With the addition of Cingular and Nextel, RadioShack now offers CDMA, GSM and Motorola's iDEN technology.
"After assessing the market place, the technology roadmaps of each carrier, and each carrier's value proposition as it relates to our customer base, we decided it was imperative to introduce a GSM carrier to remain competitive," said president and CEO David Edmondson.
The switch could affect Verizon's bottom line, as RadioShack was a large third-party reseller for the carrier. According to Verizon figures, sales at the retailer accounted for as much as 10 percent of the carrier's net subscriber additions.
A Verizon representative downplayed the loss, saying "we have a number of options available to us including the expansion of our existing channels."
It is unclear as to whether Verizon wishes to complete its contract with RadioShack, as statements Monday seemed to infer that the companies were moving in opposite directions. In the Monday conference call, Edmonson assured investors that "contingency plans are in place" if Verizon would wish to pull out early.