Hmmmm. Let's see. Let's say ATT gets an additional million new customers out of this deal with Apple. That means, just in upgrading the EDGE network, they are spending $50 per new customer. That's just one small aspect of this whole thing. There was also the story this weekend about ATT hiring on thousands of temp workers to deal with the rush of people wanting to get an iPhone. I'm sure the list of costs probably exceeds the money they will make on this in the short term.
This all reinforces my whole argument that ATT is in this, not because they will make buckets of cash on this thing, they are in it for market share.
But essentially none of this changes what I'm saying. Everything you read about the cellular market says the game there is market share. They're running operating profit margins in the 10-11% range. Normal healthy businesss. But the overall industry is not expanding like it was a decade or more ago.
That's why this is a great investment for ATT. It's about expanding market share.
Umm, market cap does not equal budget, or cash on hand or anything else other than what the stock is worth and I am to lazy to go look up what the operating budget was last year.
I've been looking for where I got the Billions quote from and I can't find it now. I saw it a few days ago. Suffice it to say that 50 million isn't really all that much money especially when you realize that this EDGE 'upgrade' really just consists of a few extra T1s to the few cell towers that they think might need them to boost capacity and some software to change the allocation of the bandwidth from voice to data calls.
Yeah, but you have to look at it relative to the market that is requiring the investment. If it's the iPhone that's is requiring them to make this investment, then that market has to have some kind of ROI. Otherwise it doesn't make financial sense.
This is what I think the other carriers balked at. It's going to cost us X dollars to get Y number of new customers. And we have to bow to Steve Jobs' ego.
The other carriers did the equation and said, "Nah. Not worth it."
ATT did the equation and said, "Hmmm. This should help us in our transition from Cingular to ATT and we are going to expand market share. We'll do it."
Relative to what they are doing I don't think the investments are nominal.