RadioShack Bolsters Wireless Focus With Verizon/Sam's Deal

RadioShack Corp.'s (RSH) addition of Verizon Wireless to 450 kiosks it operates in Sam's Club stores bolsters the consumer electronics retailer's focus on its key wireless business, though it isn't expected to have a material impact on financial results.

At this point, it also doesn't appear to signal a warming relationship between RadioShack and Verizon, which parted ways in 2005 as RadioShack switched to carrying AT&T Inc. (T) wireless plans.

RadioShack shares rose 3.4%, to $16.86 in recent trading.

RadioShack late Monday announced the addition of Verizon phones and plans to the Sam's Club-branded kiosks, effective Thursday.

"With the addition of Verizon to our kiosk operations, we've established important relationships with all four major wireless carriers in the United States," RadioShack Chairman and Chief Executive Julian Day said in a statement.

Wireless phones and services generate about a third of RadioShack's sales. The retailer's primary wireless partners in recent years have been AT&T and Sprint Nextel Corp. (S).

But the Fort Worth, Texas, company began offering T-Mobile plans and phones in its 4,450 company-operated stores in August. Launching a new marketing campaign last month that emphasizes cellphones, RadioShack executives said they're going to continue to build the retailer's business around mobile products and the mobile lifestyle.

Verizon Wireless is a joint venture of Verizon Communications Inc. (VZ) and Vodafone PLC (VOD) and is the largest U.S. wireless carrier by subscribers. T-Mobile is a unit of Deutsche Telekom ADR (DT).

RadioShack representatives didn't respond immediately to requests for additional comment.

A Verizon spokeswoman said the agreement is part of the carrier's ongoing efforts to reach more customers and noted the kiosks, operated by RadioShack subsidiary SCK, don't carry the RadioShack brand.

"Our strategy is to be where our customers shop," said spokeswoman Brenda Raney. Asked if the deal signals a step toward a broader relationship, she said, "You should take this for what it is: A relationship with SCK."

Morgan Stanley analyst Gregory Melich said the Verizon arrangement is a positive.

"Adding Verizon to Sam's Club kiosks should help, on the margin, to stabilize wireless activations," Melich said in a note to clients.

FBR Capital Markets analyst Stephen Chick said the agreement is "a subtle sign that they're working on everything wireless."

"They're obviously very focused on it," he said.

RadioShack also operates 135 kiosks on behalf of Sprint Nextel, but the companies in April agreed to cease the arrangement, and RadioShack plans to transition them to the RadioShack brand.

The third-party kiosks, generally about 99 square feet large, generated less than 7% of RadioShack's revenue and less than 3% of operating income in 2008, and both percentages declined from 2007.

"It's pretty small," Schick said of the kiosk business.

RadioShack in 2004 purchased the rights to operate wireless kiosks in Sam's Club for five years, and the two retailers in February agreed to extend the agreement through March 2011.

Separately on Monday, RadioShack said holders of its 7 3/8% notes due 2011 tendered only $43 million of $350 million outstanding under the company's cash tender offer, which expired Monday.

Schick and Melich said they expect RadioShack might use the cash originally intended for the tender offer to boost its share repurchases.

-By Mary Ellen Lloyd, Dow Jones Newswires, 704-948-9145; [e-mail]