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RadioShack Inks Long-Term Deal with Cingular RadioShack Inks Long-Term Deal with Cingular
By Jay Wrolstad
August 1, 2005 2:10PM

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The decision to replace Verizon with Cingular might have more to do with compensation issues than with adding an alternative wireless technology, suggested Yankee Group analyst John Jackson.
 

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RadioShack has inked a long-term agreement with wireless carrier Cingular and will end its relationship with Verizon Wireless as the electronics retailer seeks to broaden its mobile-phone strategy.

In addition to creating the 10-year pact with Cingular, RadioShack extended its partnership with Sprint for another 11 years. Cingular and Sprint will support RadioShack's efforts to expand retail distribution outside of the company's stores.

Better Network Diversity

"We see these agreements as helping the company gain more market share and providing more revenue in the short and long term," said RadioShack spokesperson Kay Jackson, noting that Cingular uses the Global System for Mobile Communications (GSM) wireless networking Relevant Products/Services standard that neither Sprint not Verizon support.

Adding Nextel's products and services, pending the operator's merger with Sprint, is a significant boost for RadioShack, said Jackson, citing Nextel's network Relevant Products/Services technology and push-to-talk capabilities.

RadioShack will drop Verizon products and services when the five-year contract with that carrier expires at the end of this year, Jackson said. "In looking at the technology roadmap of all three carriers, we decided it was important to expand beyond CDMA (Code Division Multiple Access) and offer the GSM protocol to remain competitive," she said.

Better Deal with Cingular?

Wireless technology is a lucrative business for RadioShack, which is the largest indirect distributor of wireless services and products in the U.S. The company has some 7,000 retail outlets and 600 wireless kiosks.

The decision to replace Verizon with Cingular might have more to do with compensation issues than with adding an alternative wireless technology, suggested Yankee Group analyst John Jackson. "The difference between GSM and CDMA is negligible to consumers, and it's likely that RadioShack is getting a better deal with Cingular," he said.

Carriers want outside distributors to improve volume sales, but they also are looking to maintain more control and reduce the cost of distribution, the analyst said. "Losing RadioShack is significant for Verizon because RadioShack has a reputation for good service and they have a huge network of stores," he added.

Cingular, the largest U.S. wireless operator, said it will gain more than 5,000 new sales outlets across the U.S., with RadioShack becoming Cingular's single largest distribution outlet. The carrier will sell its full line of post-paid products and GoPhone prepaid products through RadioShack stores starting in the first quarter of 2006.
 

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