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Why Google Inc (GOOGL) Is Getting Into Wireless Service Offering Despite Significant Competition?

Some reports suggest that Google Inc (NASDAQ:GOOGL) is getting into wireless service business. Google Inc (NASDAQ:GOOGL) is well known for venturing into business of completely different nature. One such example for Google Inc (NASDAQ:GOOGL)’s $1 billion investment into SpaceX for satellites. But it is a well-known fact that wireless service business is already under tremendous pricing pressure and is it the right time for Google Inc (NASDAQ:GOOGL) to get into this business. CNBC’s Josh Lipton reported about the story in CNBC.

Google, is GOOGL a good stock to buy, Scott Fearon, Dennis Berman,

Lipton said that according to some published reported, the internet giant, Google Inc (NASDAQ:GOOGL) has signed some deals with Sprint Corp (NYSE:S) and T-Mobile US Inc (NYSE:PCS) to offer mobile phone plans directly to consumers.

“[…] The established carriers would still own the networks, but leased a piece under Google branded name. Some small wireless carriers already function as the so called mobile virtual network operators. Google would set its prices and deal directly with customers, but it wouldn’t have to take on the expensive time consuming task of building and maintaining a network,” Lipton said.

Piper Jaffray’s Gene Munster thinks that this deal is ideal for Google Inc (NASDAQ:GOOGL), since he feels that Google Inc (NASDAQ:GOOGL) might not be a long term player in this domain.

“We believe that big goal for Google here is to motivate existing wireless providers like Verizon, AT&T to lower the prices of data. If data prices go down, Google wins. Because, people will consume more data like Youtube and do more google search,” Munster said.

Munster feels that Google Inc (NASDAQ:GOOGL) is mainly in it to reduce the data costs of other carriers and hence increase the internet traffic and get benefit out of it. Lipton said that Sprint Corp (NYSE:S) and T-Mobile US Inc (NYSE:PCS) are the third and fourth largest service provider in US, behind Verizon and AT&T, which makes them ideal for Google to partner with.

Jefferies’s Michael McCormack feels that both Sprint and T-Mobile has very little to lose in this deal with Google. He thinks that this deal might help them in adding new consumers indirectly.

Lipton also said that Sprint has made the deal renegotiable, if Google manages to get more customers. But still a lot of question still remains unanswered like, when and where Google will start operating its service and what prices they will opt to put pressure on other big players like Verizon and AT&T?

Disclosure: None

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