AT&T Inc. (T), Sprint Nextel Corporation (S): The Return of the MVNO

With the integration of Sprint Nextel Corporation (NYSE:S) and Clearwire Corporation (NASDAQ:CLWR), more MVNOs are expected to join Sprint-Clearwire Corporation (NASDAQ:CLWR)’s 4G LTE network, which could improve the network utilization and boost the revenue for Sprint and Clearwire Corporation (NASDAQ:CLWR). With increasing competitions from Sprint and other MVNOs, AT&T Inc. (NYSE:T) and Verizon Communications Inc. (NYSE:VZ) Wireless will be forced to open up more of their services to stay competitive.

In fact, AT&T just launched a new pre-paid wireless MVNO called Aio Wireless with the iPhone 5 on offer in early May. However, AT&T Inc. (NYSE:T)’s MVNO offering caps 4G data at 4Mb/s without LTE availability. In the mean time, MVNOs will continue to be a powerful weapon for Sprint to penetrate the market.

Furthermore, as the market consolidation continues for telecom companies in the United States, Softbank-Sprint-Clearwire will not be the last M&A deal. More potential M&A deals are speculated from the analysts such as AT&T’s potential offers to acquire DISH Network Corp (NASDAQ:DISH) and Time Warner Cable Inc (NYSE:TWC) and Verizon Communications Inc. (NYSE:VZ)’s buy-out offer for Vodafone Group Plc (ADR) (NASDAQ:VOD)’s stake in Verizon Wireless.

Other major tech giants, such as Google Inc (NASDAQ:GOOG) and Amazon.com, Inc. (NASDAQ:AMZN) may also be interested in moving into telecom services, where the MVNO model would probably be the best strategy for them to expand their online and offline payment offerings. By integrating the telecom, online, mobile and payment services, Google Inc (NASDAQ:GOOG) and Amazon.com, Inc. (NASDAQ:AMZN) can gain significantly edges against other online-only competitors.

Take away

The MVNO model is becoming popular again with the increasing consolidation of the telecom sector. With the recent development of the Softbank-Sprint-Clearwire deal, Sprint and Clearwire Corporation (NASDAQ:CLWR) will have much stronger resources to fight back against AT&T and Verizon, and MVNO is undoubtedly a fast, effective way to gain allies. Investors may also want to pay close attention to Google Inc (NASDAQ:GOOG) and Amazon.com, Inc. (NASDAQ:AMZN) should they decide to enter into the telecom market via the MVNO model to further strengthen their leadership.

The article The Return of the MVNO originally appeared on Fool.com is written by Nick Chiu.

Nick Chiu has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Nick is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.