Stiff Competition, Economic Downturn Cause Losses Among Cellular Reseller Firms

New York City, NY (AHN) - Resellers of cellphone services are experiencing a downturn as the U.S. economy slows down.

The reasons behind their income decline include competition from major carriers and lack of distinctive service. When the U.S. cellphone market was still young, the larger carriers focused on the high-end segment, while mobile virtual network operators profited from the youth and lower-income prepaid market. However, when the penetration rate reached 84 percent, competition became stiffer.

Among the latest to close shop were Sonopia, Movida Communications and Voce, although APC Wireless eventually purchased Movida. In the past year and a half, 10 wireless resellers have shut down, 55 are still open, although many are struggling for survival.

Number two Virgin Mobila reported a 75 percent decline in its first quarter earnings.

Even the larger communications companies are going through a rough time. Bloomberg reported Qwest Communications International logged a 35 percent first quarter loss due to reduction in home line subscriptions and higher taxes. Qwest's subscribers opted for mobile phone services and new offerings from cable television companies.