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Facebook Inc (FB): Mobile Announcement Faces Too Many Roadblocks

New phones

Adding to the roadblocks is the expected scenario that a new Facebook-centric OS will require new lines of phones. HTC just launched a new flagship phone, the HTC One, so we’re likely to see an entirely new phone on Thursday. It’s hard to imagine other companies installing the new OS on their flagship devices as well, so Facebook Inc (NASDAQ:FB) is banking on sales of new phones.

The reason this is a roadblock is that wireless carriers, such as AT&T Inc. (NYSE:T) and Verizon Communications Inc. (NYSE:VZ) aren’t too fond of the features Facebook brings to mobile devices, and sales success is largely dictated by the carriers. They can choose which phones are sold in their stores, and how much they promote each phone. It’s hard to sell phones that don’t find their way in front of customers.

Facebook Inc (NASDAQ:FB)’s OS will likely push users to use its Messenger app, which allows people to send free text messages over WiFi or cellular data. Social messaging cost operators approximately $23.2 billion in lost revenue last year.

While free messenger services may boost data plan sales, it’s not worth the sacrifice for carriers. Margins on text messaging are ridiculously high as the cost for carriers is practically nothing regardless of volume. Data plans, however, provide significantly lower margins.

It simply doesn’t make sense for big carriers, which rely on packaging texting plans with data plans, to promote a product that provides a significant threat to that business.

Facebook Flop

In my opinion, this announcement looks set up for failure. There are too many roadblocks the company must overcome in order for a new OS and Facebook-focused phones to succeed. The only chance for success is to create enough buzz and demand that carriers are forced to stock new phones and manufactures all want their hands on the new OS. Although, if any company has the platform to pull something like that off, it’s Facebook Inc (NASDAQ:FB).

The article Facebook’s Mobile Announcement Faces Too Many Roadblocks originally appeared on Fool.com and is written by Adam Levy.

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

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