Google wants to be your phone company
Google (GOOGL) is getting into the cellphone business.
Various reports say the company is teaming up with Sprint (S) and T-Mobile (TMUS) to offer wireless service directly to customers. The “piggy-back” arrangement would have Google reselling service using the networks of the two other providers, possibly beginning later this year.
Yahoo Finance Columnist Rick Newman says this clearly fits into Google’s overall marketing strategy.
“Google is doing a lot of things to make sure that they are basically top of mind with consumers in everything consumers do,” he notes. “They want to get into the car, they want to get into your home, they want to be an integral part of everything you do.”
Yahoo Finance Senior Columnist Michael Santoli agrees.
“Google aspires to be the central repository of everybody’s information--Gmail, Google docs, Chromebook, all these things,” Santoli says. “They basically say you can just walk around wherever you are and plug into Google for whatever you need.”
The reports say the project, codenamed “Nova,” will allow Google to get a foothold in the industry without having to invest in pricey infrastructure. Newman feels that's key.
“It's important to note Google is not going to be building its own cellphone towers,” he adds. “I think shareholders would have a heart attack if Google was actually starting their own business in that regard because that’s very expensive and low margin.”
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Newman isn’t sure if cellphone users will benefit from Google getting into the wireless service arena.
“It’s not clear to me what’s in this for consumers,” he says. “There’s no reason to necessarily think this will spark a price war unless Google is willing to resell that service at a loss or a very low margin. So we’re not getting new cellular service here, we’re just getting reselling.”
However, Newman believes loyalty could play a factor in boosting demand.
“It’s branded selling under Google,” he points out. “So there probably will be some people-- Google’s reasoning-- who like the Google portfolio of services so they’ll add cellphone service to it.”
Newman notes that Google has no problem venturing into uncharted waters…and they can afford it.
“They try a lot of things,” he notes. “They have enough money to experiment if you will and back away if it doesn’t pan out.”
However, Newman isn’t convinced this latest effort will succeed.
“Not everything Google touches turns to gold,” he says. “The classic example of that is Google Glass, which basically is a flop. So I don’t know if people are going to jump on this or not.”
