Rumor has it that search giant Google Inc. (GOOGL) is planning to sell wireless phone service directly to consumers in alliance with Sprint (S) and T-Mobile (TMUS) networks. Neither company was available for comment on the reports.
Shares of Google were up 2.05%, touching a high of $521.85, before closing a notch lower at $520.39.
Per reports, Google is preparing to become a mobile virtual network operator or MVNO. An MVNO agreement would enable the company to sell wireless service under its own brand name even though it does not control the network.
Therefore, Google is planning to enter the wireless Internet market by purchasing access on the Sprint and T-Mobile networks.
Google is gearing up to vend mobile phone plans directly to users and manage their calls and mobile data over a cellular network. Google’s wireless service, codenamed “Nova,” will run on the Sprint and T-Mobile networks. The reports neither cited how extensively Google plans to offer the service nor what it will cost or even when it will be released.
The technology giant is reportedly trying to venture into the wireless industry offering more affordable wireless data plans and slashing prices to ensure that its services such as Gmail and YouTube can be easily accessed, thereby leading to the expansion of its user base and driving its advertising revenues.
Google’s deal to become an MVNO can also pose a threat for the U.S. wireless market where Sprint and T-Mobile hold the third and fourth place, respectively behind Verizon Communications Inc. in the first place and AT&T Inc. (T) in the second.
But then again it would place Google in direct competition with the carriers that sell and promote its Android mobile-phone devices.
Google has been exploring new areas of business in the last few years as its core advertising business is up against increasing competition. Internet access is a pet area and the company has several initiatives targeted at this. Some of its other efforts include high-altitude hot-air balloons called Project Loon, satellites and solar-powered drones. The spread of connectivity will help Google to bolster its user base and sell more digital advertising.
Google is gradually strengthening its foothold in new markets to diversify its revenue base and explore growth outside search. It currently holds a Zacks Rank #3 (Hold).
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