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The Telecom Sector's Movers: Sprint, Verizon, and AT&T

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The Telecom Sector's Movers: Sprint, Verizon, and AT&T PART 1 OF 14

Sprint Acquires a 33% Stake in Musician-Owned Tidal Streaming Service

Sprint takes a 33% stake in Tidal

In January 2017, Sprint (S) moved to acquire 33% of Tidal, a streaming music service available in more than 52 countries and used by ~3 million paying subscribers. Tidal is a coalition owned by artists including Jay Z, Alicia Keys, Jason Aldean, Madonna, and Daft Punk.

Tidal competes with Spotify, Pandora (P), and Apple (AAPL) in the streaming music market. The chart below shows Tidal’s major rivals and the number of their paying subscribers.

Sprint Acquires a 33% Stake in Musician-Owned Tidal Streaming Service

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A catch-up move

Neither Sprint nor Tidal disclosed how much money was involved in the deal, but a Music Business Worldwide report estimated that Sprint may have paid $200 million for the stake.

But why did Sprint make the move? Sprint’s acquisition of a stake in Tidal is primarily a catch-up move. Its rivals AT&T (T), Verizon (VZ), and T-Mobile (TMUS) already have some form of media presence with streaming music or video services, and Sprint was lagging behind. With a stake in Tidal, Sprint not only joins the trend of wireless carriers buying media assets, but the company also hopes the move could help it make up for what it lacked.

Driving growth

In addition to catching up with industry trends, Sprint (S) is hungry for more growth. Sprint can attract more subscribers through the deal with Tidal and other services, and it can also garner more revenues from its existing customer base. In the December quarter, or its fiscal 3Q16, Sprint’s revenue per postpaid subscriber averaged $49.70, short of the consensus estimate of $49.74.

Tidal could also help make Sprint’s services stickier. The company reported that its churn rate increased to ~1.7% in fiscal 3Q16 from ~1.5% in fiscal 2Q16.

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