United States Cellular Corp. (USM), a subsidiary of Telephone and Data Systems Inc. (TDS) has introduced two new Google’s (GOOG) Android powered smartphones, HTC Merge and LG Genesis. While HTC Merge made its debut on May 31, LG Genesis will hit the market on June 9.
Both smartphones are packed with endless features and applications including Froyo 2.2 Android platform, Wi-Fi along with an 8GB memory card. While HTC Merge is the first Android-based Global Ready smartphone launched by U.S. Cellular, LG Genesis incorporates two touchscreens that use the unique Swype technology on a virtual QWERTY keyboard. Both devices are priced at $149.99 after a mail-in rebate of $100.00.
The company remains optimistic on the growing demand for its smartphones. Notably, smartphone sales represent nearly 42% of the company’s equipment sales and hence, are expected to remain a key factor in driving revenue in the future.
In order to make the most of the booming telecom equipments market, last year, U.S. Cellular expanded its smartphone and Tablet arena by launching high-performance Android-based phones. These handsets are expected to drive revenues going forward on higher adoption and penetration.
Further, these smartphones remain key drivers of the company’s data revenues as they are backed by U.S. Cellular’s high-speed nationwide 3G Evolution-Data Optimized (EV-DO) network.
Till date, U.S. Cellular has the highest call quality and network satisfaction as it covers approximately 98% of its customers with its 3G network. U.S. Cellular continues to expand the coverage of its EV-DO technology-based 3G wireless network to target the massive revenue opportunity that can be tapped through the roll-out of advanced features and data services.
The company also launched “The Belief Project," which focuses on price plans and handsets as well as provides a compelling high-value portfolio of products and services. In the first quarter of 2011, the company added approximately 1.8 million new customers to its Belief plan.
However, the company faces strong margin pressure given increased smartphone subsidies along with related costs. Additionally, U.S. Cellular remains highly exposed to strong competitive pricing pressure from telecom giants like AT&T (T) and Verizon Communications (VZ) that is creating a significant dent in its customer base and leading to poor profitability for the company.
We currently have a long-term Neutral rating on U.S. Cellular. The company holds a short-term (1–3 months) Zacks #3 Rank (Hold).
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