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With all the chatter about Sprint’s renewed talks with T-Mobile, Trent Welsh stepped forward with an intriguing article on what might really be transpiring. It’s well known that Masayoshi Son, the founder and CEO of SoftBank (which owns about 85% of Sprint) has a 300-year vision. Sprint is an important asset in that vision.
This is why talks with T-Mobile have continually gone nowhere. Son seeks substantial power over the combined entity (to enable continued progress toward his vision).
This has an impact on our investment in SMSI. Here’s why…
Barring a change of heart, one of two thing will happen:
1. T-Mobile will acquiesce to Son’s wishes (albeit at a price), making Sprint the controlling entity. If that happens, SMSI’s marquee customer will instantly become 2.5x larger with commensurate implications for SMSI’s opportunity there. In that event, the shares should rise dramatically.
2. Talks break down again and SoftBank sets its sights on Charter Communications. Presumably, this would have no impact on SMSI, positive or negative.
There’s an interesting wrinkle on this. I saw the following amid the fodder in one of the public investment forums:“I strongly suspect SMSI will be involved with the launch of the Charter wireless WiFi first service due to launch this quarter. They have already secured Comcast and with Comcast and Charter cooperating with their wireless services, it seem inevitable that SMSI will be involved with Charter. Plus additional revenues from new markets for CommSuite plus renewed interest in Netwise and suddenly the entire product portfolio could be in demand. They have spent close to $100m developing their product portfolio and have slashed the size of the company which is now very lean. So if there is additional sales from other products later this year, revenues could grow extremely rapidly.”Just a little something to add to the intrigue.
T-Mobile currently uses the same solution that Sprint replaced with SMSI… and SMSI has a long history with T-Mobile. It’s safe to say that talks have already occurred regarding SMSI’s product.
But that doesn’t mean that T-Mobile will automatically follow Sprint’s lead and switch to SMSI. it all depends on T-Mobile’s objectives. T-Mobile could choose to 1) consolidate around the older solution, 2) consolidate around the SMSI solution, or 3) keep both solutions in place for a prolonged period to see how the newer SMSI solution fares.
Personally, if T-Mobile wrests control of Sprint from SoftBank, I view #3 as the most likely scenario. The low-hanging fruit in a Sprint / T-mobile marriage is in consolidating their networks and spending. Combining smaller pre-existing programs are not likely going to be a priority, especially considering the upfront money, effort, and bandwidth required.
This won’t be as much of an issue if SoftBank gets control over the combined entity. The SMSI solution is viewed by Sprint as a strategic means of locking in customers and increasing ARPU.
Accordingly, it would stand to reason that they would simply leverage their existing transition team to extend the transition to T-Mobile customers. The fact that they’re using the same legacy solution would make this process relatively easy (and quickly pay for itself in the form of headcount reductions). Conversely, forcing Sprint customers to switch back to the older T-Mobile solution (immediately after being switched to the SMSI solution) would serve no strategic purpose and prove to be a PR headache.
Just my two cents.
Coming Up: Investigating Why SMSI Might Be A Ten-Bagger
- Sprint FINALLY Ramping Up SMSI’s Product!
- Videocast: AEHR 10-Q, MoviePass Update
- AEHR Grows 175% — Beats On The Top & Bottom Line (Buying More)
- GAIA vs. MoviePass: CAC Shows Which One Is A True Mini-NFLX
- Major Update on SMSI
- SMSI’s Safe & Found App: 100,000 Downloads & Counting
- MoviePass Projected To Burn $600M In 2018
- SMSI: Riding A New Trend & Making Its Latest Comeback
- Mark Gomes Research
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Disclosures / Disclaimers: I am long SMSI. However, this is not a solicitation to buy, sell, or otherwise transact any stock or its derivatives. Nor should it be construed as an endorsement of any particular investment or opinion of the stock’s current or future price. To be clear, I do not encourage or recommend for anyone to follow my lead on this or any other stocks, since I may enter, exit, or reverse a position at any time without notice, regardless of the facts or perceived implications of this article.
I am not a financial advisor. Nor am I providing any recommendations, price targets, or opinions about valuation regarding the companies discussed herein. Any disclosures regarding my holdings are true as of the time this article is written, but subject change without notice. I frequently trade my positions, often on an intraday basis. Thus, it is possible that I might be buying and/or selling the securities mentioned herein and/or its derivative at any time, regardless of (and possibly contrary to) the content of this article.
I undertake no responsibility to update my disclosures and they may therefore be inaccurate thereafter. Likewise, any opinions are as of the date of publication, and are subject to change without notice and may not be updated. I believe that the sources of information I use are accurate but there can be no assurance that they are. All investments carry the risk of loss and the securities mentioned herein may entail a high level of risk. Investors considering an investment should perform their own research and consult with a qualified investment professional.
I wrote this article myself, and it expresses my own opinions. I am receiving no compensation for it, nor do I have a business relationship with any company whose stock is mentioned in this article. The information in this article is for informational purposes only and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action.
The primary purpose of this blog/forum is to attract new contacts with professional industry expertise to share research and receive feedback (confirmation / refutation) regarding my investment theses.