Sprint Corp. (S), the third largest telecom operator in the U.S., is set to open mini-shops in as many as 1,750 of RadioShack's stores. The expansion is part of Sprint’s plan to spur a turnaround and revamp its sinking business by adding more retail locations.
Last week, RadioShack filed for Chapter 11 bankruptcy. The company has been struggling to raise enough cash and credit to stay afloat, and has failed despite several attempts to turn around its business over the last 18 months.
RadioShack stated in its filing that it plans to sell 1,500 to 2,400 stores to its leading shareholder, Standard General’s affiliate – General Wireless. Moreover, the beleaguered electronic and mobile products retailer is looking to close the rest of its U.S. stores and is also in discussions to sell its remaining overseas assets.
Interestingly, Sprint has jumped at the opportunity. The carrier has cut a deal with Standard General to open its mini-shops in the outlets bought by the latter. Per the deal, Sprint would effectively manage a small shop within a larger RadioShack store, taking up around one-third of the retail space at every location.
Sprint employees will sell mobile devices and plans on all Sprint products including Boost and Virgin Mobile. Particularly, the stores will be co-branded, with Sprint being the key brand on RadioShack storefronts and advertising materials.
Though the deal is expected to be closed in the coming months, it must first receive regulatory approval by a bankruptcy court. Thus, other potential buyers will also have the scope to bid for RadioShack's stores in the bankruptcy procedure.
Notably, Sprint has been largely dependent on third-party retailers to drive subscriber additions and boost sales. As a result, Sprint has only 1,100 self-recognized stores, as compared to three of its major competitors, namely, Verizon Communications Inc. (VZ), AT&T, Inc. (T) and T-Mobile US, Inc. (TMUS). While Verizon has about 1,700 outposts of its own, both AT&T and T-Mobile run over 2,000 stores.
Of late, Sprint has also intensified the pricing war within the telecom industry. In Dec 2014, the company offered a data plan same as that provided by Verizon and AT&T at a 50% discount in perpetuity, if Verizon and AT&T customers shift to Sprint’s services. Recently, Sprint decided to offer a lucrative credit plan to all T-Mobile customers in order to lure them away from the latter.
Thus, we believe the deal might help the company increase its presence in the market, develop its distribution system, reverse the loss of customers and evade a further plunge in position among the major wireless carriers in the U.S.
Sprint currently carries a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment