According to reports, RadioShack (NYSE:RSH) is contemplating on launching its own mobile service. This move is the first of its kind for a consumer electronics store like RadioShack. Sources claim that RadioShack wants to enter this business through a mobile virtual network operator (MVNO) route, where it will use another network’s service but license and brand it as its own.  We have a price estimate of $3.71 for RadioShack, which implies a premium to the market price.
Struggling with problems
RadioShack has been troubled with declining gross margins for a long time. And this trend is expected to continue due to the shift within mobility sales toward lower margin smartphones. Besides, it is also facing the problem of showrooming which affects brick and mortar retailers, wherein customers check a product at a physical store and eventually buy it at a cheaper price online.
Own mobile service carrier – Is this the right move?
RadioShack, which is troubled with the problem of showrooming and declining margins, is presently in talks with Cricket Wireless, a prepaid mobile carrier. If the reports are true, this move could play a very crucial role in the company’s future plans. It is yet to be seen whether this move will help RadioShack recover from its recent losses and help it fend off increasing competition.
In the past, firms like Disney (NYSE:DIS) have tried their hands at the MVNO route, however, they were unsuccessful and had to eventually scrap the service.  We believe RadioShack, which sells these services for other players, can leverage its large customer base, experience and physical presence to its advantage. It is too early to comment on the chances of success of this venture for the consumer electronics retailer as it struggles with a host of other problems. The situation will be clearer once RadioShack provides further details on this venture.Notes: