Market Overview

Apple's New iPad Data Consumption Could Benefit Sprint

Another day, another negative piece of news about Apple's (NASDAQ: AAPL) new iPad. Earlier today, USA Today reported that the new iPad's 4G connection can drain users' limited 2 GB data plans in less than 24 hours.

Verizon (NYSE: VZ) is currently offering monthly data plans for iPad starting from 1 GB ($20) to 10 GB ($80). AT&T's (NYSE: T), on the other hand, offers monthly plans for tablets starting from $250 MB ($14.99) and going up to only 5 GB ($50). Hence, it is evident that there is no sufficient service available for data hungry users who would like to user their iPads outside of wireless networks.

At this point, Verizon is not planning to chance its data plan offerings to match the increased data need by the iPad users. However, the company's spokesperson told that Verizon is giving its users tips to use the limited data more efficiently. These tips include using the Verizon Wireless data calculator to understand how much data it takes for a specific activity and using WiFi for more data consuming tasks, such as streaming Netflix (NASDAQ: NFLX) videos.

This could provide an opportunity for Sprint (NYSE: S), which is the only major nationwide service provider offering an unlimited data plan. Although Sprint does not currently offer a competing tablet, there have been rumors earlier this month that Best Buy (NYSE: BBY) will start selling Sprint iPads. If this was the case, Sprint could see a significant number of iPad users switching to the company's unlimited data plan, which could be the boost that Sprint needs in order to become profitable.

Clearwire (NASDAQ: CLWR) is another company that could significantly benefit if the iPad users switch from Verizon and AT&T to Sprint. Clearwire provides 4G services and has a strong relationship with Sprint, which is Clearwire's biggest client.

However, Sprint's downfall is that the company's 4G network is not as extensive as Verizon's or AT&T's. For example the iPad users in Michigan would not be able to enjoy Sprint's unlimited data as its 4G network is not currently covering the state. Hence, the company could not be able to tap into certain markets without new infrastructure investments, which seem unlikely due to the company's weak cash position.

You can follow me on Twitter @TuomoKallio


ACTION ITEMS:

Bullish:
Traders who believe that Sprint will become a strong player in the tablet market might want to consider the following trades:
  • Go long Sprint or Clearwire
  • Short AT&T
Bearish:
Traders who believe that Verizon and AT&T will maintain their foothold may consider alternative positions:
  • Short Apple, as data problems might hurt iPad sales
  • Short Apple iPad suppliers, such as Nuance Communications (NASDAQ: NUAN)
Neither Benzinga nor its staff recommend that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. Benzinga recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation.

Personal disclosure: Long VZ

Posted-In: 4G Apple AT&T ClearwireLong Ideas Short Ideas Tech Trading Ideas Best of Benzinga

 

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