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AT&T, Verizon Wireless Q1 Margin Boost Might Last Until iPhone 7

Wireless profit margins at AT&T ( T ) and Verizon Communications ( VZ ) should improve when they report first-quarter earnings — owing to fewer customers upgrading to new smartphones — a trend that might continue until Apple ( AAPL ) rolls out its iPhone 7 in the fall. The improving wireless margins at Verizon and AT&T has its roots in financing plans with monthly installment payments and accounting methods. Michael Rollins, an analyst at Citigroup, says upgrade rates are falling as wireless customers hang onto devices longer. “The longer device embrace by customers should help carrier financials for the first quarter,” Rollins said in a research report Friday. Apple’s iPhone 6S refresh was only a “marginal improvement” over the earlier iPhone 6, but the iPhone 7 should be different, Rollins says. “The iPhone 7 could lead to another industrywide upgrade cycle, as has been seen by each new ‘number’ of iPhone, and we await more details about the innovations it will contain,” he wrote. “Even with faster device sales in Q4, we are starting to see signs that the device cycle could eventually extend to 27 to 30 months, up from more traditional pacing of 24-26 months back in 2014-2015.” Jefferies analyst Mike McCormack has a similar view. “We expect lower volumes as upgrades hit record lows, supporting stronger industry margins,” McCormack said in a research note Thursday. “We expect this theme to prevail going forward, at least until the iPhone 7 launch this fall. We see opportunity for margin outperformance at both AT&T and Verizon, and continued positive momentum at T-Mobile US ( TMUS ).” Verizon kicks off the telecom Q1 earnings season on April 21, followed by AT&T on April 26. UBS analyst John Hodulik was ahead of the pack with a report out March 18. “The move to installment sales for handsets has been a big driver of improved industry profitability given the accounting treatment,” wrote Hodulik. “However, installment plans are also having more tangible effects on the industry by lengthening upgrade cycles for postpaid phones. “This is putting pressure on upgrade rates, which is in turn driving lower churn and fewer gross adds. We believe this will be a key theme for Q1 earnings, driving another quarter of strong sector profitability, especially at AT&T and Verizon.” Shares of both AT&T and Verizon were up a fraction in afternoon trading in the stock market today .

Comcast Dabbles In Internet, Media While Big M&A Waits

Comcast ’s ( CMCSA ) investment in Groupon — through a company headed by its former CFO — continues the cable TV firm’s move into Internet, software and media assets. Comcast continues to steer away from major M&A, though, following last year’s demise of the proposed Time Warner Cable ( TWC ) acquisition. Atairos, an investment firm formed by former Comcast CFO Michael Angelakis and funded mainly by the cable TV firm, said on Monday that it would invest $250 million in struggling Groupon ( GRPN ). Angelakis will join Groupon’s board. Chinese e-commerce firm Alibaba Group ( BABA ) earlier this year invested in Groupon. While Comcast’s chief financial officer, Angelakis engineered the cable TV firm’s two-part purchase of media giant NBCUniversal from General Electric ( GE ). In November, Comcast brought in new M&A expertise. Comcast named Robert Eatroff, formerly Morgan Stanley ’s ( MS ) head of mergers and acquisitions for the Americas, as its new executive VP of global corporate development and strategy. Comcast has signaled interest in making acquisitions overseas. Speculation that Comcast could buy a wireless phone company, such as T-Mobile US ( TMUS ), has cooled, though the cable TV firm has filed as a potential bidder in a government auction of airwaves. Comcast continues to active in media investments. Comcast’s Fandango, an online movie ticket seller, earlier this year acquired movie websites Flixster and Rotten Tomatoes from Time Warner’s Warner Bros. Fandango also bought online video retailer M-Go. In 2015, NBCUniversal invested $250 million in website BuzzFeed. Comcast also invested in digital publisher Vox Media and Visible World. Image provided by Shutterstock .

AT&T Expands Cricket Store Reach In Prepaid Battle Vs. T-Mobile

AT&T ( T ) has again expanded the retail reach of it Cricket brand, with distribution deals at Best Buy ( BBY ) and Aaron’s ( AAN ), as it battles T-Mobile US ( TMUS ) in the prepaid wireless market. AT&T acquired Leap Wireless and its Cricket brand for $1.2 billion in 2014. Since then, AT&T has stepped up Cricket advertising while opening more retail stores. T-Mobile acquired prepaid specialist MetroPCS in 2013. AT&T says it will add 1,000 Best Buy locations and 2,000 stores through Aaron’s, a nationwide lease-to-own retailer, to its Cricket distribution network. AT&T earlier signed deals with Target, Wal-Mart, and GameStop ( GME ). AT&T has nearly 4,000 Cricket-owned stores. Cricket wireless services now will be sold at 12,000 outlets across the U.S., including AT&T’s Cricket stores and distribution at Target ( TGT ), Wal-Mart ( WMT ), GameStop, Best Buy, Aaron’s and other locations. About one-fifth of U.S. mobile phone users buy prepaid wireless services. Prepaid customers buy calling minutes and data as needed. Many prepaid plans renew automatically every month, blurring the line with postpaid subscribers that have service contracts. Prepaid customers typically buy less-pricey phones upfront, and spend less on data services. T-Mobile and AT&T both added 469,000 prepaid subscribers in Q4, while  Verizon Communications ( VZ ) shed 157,000 and Sprint ( S ) lost 491,000. Some of Sprint’s prepaid subscribers upgraded to postpaid plans. AT&T stock was up a fraction in midday trading in the stock market today , above 39. Shares are more than 7% extended from a 36.55 buy point first touched on Feb. 3. T-Mobile stock also was up a fraction midday Monday.