United States Cellular Corp. (USM), a subsidiary of Telephone and Data Systems Inc. (TDS) plans to launch seven new smartphones based on Google’s (GOOG) Android platform by the end of this year.
With the new launches, the company will also mark its debut in 4G enabled devises. All the seven new smartphones will run on 2.3 operating system, called Gingerbread and have preset applications like Gmail and Google Maps.
Further, the company will also introduce two new mobile tablets along with its entry into Windows 7 platform with four new HTC smartphones.
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 growth driver in the near future.
In addition to smartphones, U.S. Cellular offers bundled service plans like the very popular “Belief Plan,” which focuses on price plans and handsets as well as provides a compelling high-value portfolio of products and services. Its Premium Plus Family and Primary Plus Plan are also contributors to growth.
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-DOtechnology based 3G wireless network to target the massive revenue opportunity from the roll-out of advanced features and data services.
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.
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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