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Worst of the Week: RadioShack strife a damper on Sprint turnaround

The recent second bankruptcy filing by RadioShack hit WOTW from out of left field and could trip up turnaround plans at Sprint.

Hello! And welcome to our Friday column, Worst of the Week. There’s a lot of nutty stuff that goes on in this industry, so this column is a chance for us at RCRWireless.com to rant and rave about whatever rubs us the wrong way. We hope you enjoy it!

I gotta admit, I didn’t see it coming.

That “it” would be electronics retailer and Sprint partner RadioShack having to recently file for bankruptcy protection just two years after having filed for bankruptcy protection. (I wonder if they were able to use the same forms and just initial the date change?)

I mean the last time I walked into a RadioShack store to purchase my Tandy TRS-80 that place was packed with people. While waiting for the forklift to help get the computer off the shelf, I attempted to stroll through the store and couldn’t get anywhere near the speaker wire couplers, CB radio scanners or Betamax tapes.

I had no better luck checking out those items at the other RadioShack store just across the street.

And yet somehow all of those locations virtually on top of each other and each with wall-to-wall floor traffic was not enough to keep the company in business … twice. Who would have thought?

The company, which touts itself as “the neighborhood electronics convenience store,” said recently it was closing 200 locations and “evaluating options on the remaining 1,300.” Not the most encouraging statement for those locations up for review.

Digging further into the explanation, RadioShack touted operating triumphs since its previous bankruptcy filing, including reduced operating expenses and increased “gross profit dollars.” Heck, the company said it sold more than 1 million private branded headphones and speakers, which might indicate just how far the company had to go down the list in order to pick out some positive news.

Despite all of this “good” news, RadioShack still found itself in a financial hole, with the company placing blame squarely on “the surprisingly poor performance of mobility sales, especially over recent months.” Well now, that’s a cold slap to the face.

Going back to the beginning of this tale where I mentioned RadioShack as a “Sprint partner,” it must be noted that the partnership is pretty deep. Dating back to the previous bankruptcy, Sprint took the initiative to “invest low” in scoring a store-within-a-store deal and rebranding of more than 1,000 RadioShack locations.

At that time, a managing partner for Standard General, which is the non-sexy named entity behind RadioShack, boastfully proclaimed: “The new company has now been reorganized around a solid retail franchise underpinned by a world-class mobility carrier, Sprint Corporation.”

Furthering the love connection, Sprint CEO Marcelo Claure added: “We’ve proven that our products and new offers drive traffic to stores, and this agreement would allow Sprint to grow branded distribution quickly and cost-effectively in prime locations. Sprint and RadioShack expect to benefit from operational efficiencies and by cross-marketing to each other’s customers.”

I am going to go ahead and assume that this partnership was probably doomed from the start, not because of necessarily the parties involved, but because the wireless retail market has just become too competitive for any entity with even a hint of a shaky foundation making a sustainable play in the space.

But, we also can’t ignore the fact that the parties involved have indeed shown an inability to maintain an ongoing business model selling home stereo system cable couplers or 1 million headphones and speakers in the case of RadioShack, and some questionable marketing and distribution moves in the case of Sprint.

While losing potentially a significant chunk of its current retail locations should RadioShack close shop, Sprint put up a brave face in stating it will “continue to fine tune our Omnichannel sales strategy to serve customers wherever, whenever and however they want.”

I think everyone in the telecom space is well aware of Sprint’s efforts to turn around operations both to the benefit of current customers, employees and stakeholders, as well as potentially new stakeholders. But, as explained by the likes of Walter Piecyk at BTIG Research and insight from Jeff Moore at Wave7 Research, it’s likely this out-of-left-field hiccup at RadioShack could put a damper on some of those plans.

Perhaps the best course of action may be in Sprint investing yet again into the RadioShack store assets in hopes of finally striking retail gold. I mean what are the chances of this happening thrice?

Thanks for checking out this week’s column. Here’s a quick extra to get you through the weekend:

–T-Mobile US recently upped the stakes in the odd limit setting level of “unlimited” data plans.

The carrier noted that as part of its regular network testing of consumer usage, it bumped up the amount of data available to customers before there is a potential of their data speeds being throttled from the previous 28 gigabytes per month to now 30 GB per month.

“This threshold represents how much the top 3% of data users on our network consume – which means they’ve used more data than 97% of T-Mobile customers,” the carrier explained.

The move extends T-Mobile US’ leadership position among its nationwide rivals in terms of the data point in which consumers may have their speeds neutered, which in the marketing world of unlimited data is apparently something to brag about.

My only question with all of these threats of speed limiting is that I have often seen seemingly high-quality connections from various carriers show network testing speeds that rival a poor 2G data connection, yet I am not on an unlimited data plan nor anywhere near my data bucket limit.

I guess my obviously unwanted advice to carriers would be to perhaps tone down the data cap rhetoric and maybe focus a bit more on providing a consistent user experience.

I welcome your comments. Please send me an e-mail at dmeyer@rcrwireless.com.

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