This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Cramer's Action Alerts PLUS - See his portfolio and get alerts BEFORE every trade. Learn more NOW!

2013: Google Leads a Phone Price War

This leads us to 2013 prediction number three.

Dramatically Falling Monthly Service Fees

I have just established that if you are a Google (Android, Nexus) customer, your voice and SMS expense could go to zero in 2013. So obviously you're not going to send a check to Verizon (VZ - Get Report), AT&T (T - Get Report), T-Mobile and Sprint (S) for services you will not be buying from them.

Now, all you need from the carriers is data. This means that the carriers lose all SMS and voice revenue as such. On an AT&T or Verizon $90 monthly bill, those are $60 out of the $90. What's left is $30, the data revenue.

Did you pay attention here? AT&T and Verizon will lose 67% of their wireless revenue. Capische? Do I have your attention now?

It may actually be even worse than that. T-Mobile already today offers data plus voice and SMS for $30, although only 100 minutes. But by the end of 2013, you can just chuck the SMS and voice pieces from the $30, and you're now at $20 to $25, tops.

Republic Wireless, who is reselling Sprint service, already offers unlimited-everything for $19 per month. FreedomPop, also a Sprint reseller, offers a little bit of cellular data for FREE -- you only pay a $99 one-time payment for the equipment.

I will skip straight to the bottom line here: Google will pressure Sprint and T-Mobile resellers to offer a fat bucket of data -- 5 gig or even 10 gig -- for $19 per month. You get your SMS and calling from Google for free. That's it -- $199 for a Nexus 5 smartphone, plus $19 per month for everything: "Do you hear me now?"

In this radical race to the bottom, the revenue and profitability at AT&T and Verizon in particular will plummet. Apple? Without something to counter Google's cloud services, it could only ride "for free" on the $19/month data -- but voice and SMS would be extra. So an iPhone would probably be at least three times more expensive than and Android Nexus over two years.

That would likely cap Apple's market share, and more likely cause some people to abandon the iPhone in favor of Google Android Nexus.

So there you have it, folks: 2013 will be the year the smartphone pricing fell through the bottom. Google is in the driver's seat in this race, with Sprint and T-Mobile helping along, eagerly seeking to savage AT&T's and Verizon's market shares.

Stock impact? I'm starting to get worried, on almost all fronts.

At the time of submitting this article, the author was long GOOG and AAPL.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

3 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
AAPL $126.41 -1.66%
GOOG $575.33 0.34%
MSFT $43.11 0.13%
S $5.38 3.26%
T $34.00 0.00%

Markets

DOW 18,135.72 +38.82 0.21%
S&P 500 2,101.04 +2.51 0.12%
NASDAQ 4,982.8090 +15.6680 0.32%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs