RadioShack shuns T-Mobile for Verizon; shares soar

Reuters News
|
Posted: Jul 26, 2011 8:24 AM

By Dhanya Skariachan

NEW YORK (Reuters) - RadioShack Corp cheered investors by putting an end to an unprofitable partnership with T-Mobile and replacing it with Verizon Wireless that has more U.S. customers.

The news pushed shares in the U.S. consumer electronics chain up 12 percent.

The decision came less than six months after RadioShack alleged that Deutsche Telekom AG's T-Mobile USA unit had "materially breached" their contract. The retailer also said T-Mobile's product offerings were not competitive with those of other carriers.

On Tuesday, RadioShack said Verizon Wireless, a joint venture of Verizon Communications Inc and Vodafone Group Plc, will provide postpaid and prepaid wireless products and services in more than 4,300 RadioShack U.S. company-operated stores starting September 15.

The company also reported a drop in quarterly profit after weak consumer demand and cutthroat competition forced it to offer more margin-sapping discounts.

Net income fell to $24.9 million, or 24 cents a share, in the second quarter, from $53.0 million, or 41 cents a share, a year earlier.

Sales at the company, which was recently dropped from the Standard & Poor's 500 Index, fell to $941.9 million from $962.3 million in the year-ago period.

Analysts on average were expecting a profit of 37 cents a share, on sales of $1.03 billion according to Thomson Reuters I/B/E/S.

(Reporting by Dhanya Skariachan, editing by Gerald E. McCormick, Dave Zimmerman)