BlackBerry-maker RIM under pressure to cut carrier fees

Research In Motion Ltd., the BlackBerry maker whose stock has dropped 95 per cent since 2008, is under pressure from mobile phone companies to reduce carrier fees that generate $4.09 billion in annual revenue.

RIM said it faces demands to cut the fees paid by customers such as AT&T Inc. after posting its first loss in a decade last week. The fees account for more than a third of revenue at RIM, which is racing to introduce BlackBerry 10 phones and engineer a turnaround.

“There’s definitely negotiations going on right now to reduce” the fees if the company has acknowledged its concern, said Sameet Kanade, a technology analyst at Northern Securities.

Kanade, who rates RIM a sell, estimates revenue from the monthly fee could drop 17 per cent to $3.4 billion this year and another 18 per cent to $2.8 billion in fiscal 2014 as carriers such as AT&T and Verizon Wireless seek lower fees amid the company’s diminishing clout. RIM is the only handset maker to charge such a fee.

so i have been using my moms iphone 4s sometimes and i dont find that phone user friendly or intuitive at all.

what do ppl like about that phone?????

RIM levies the fees to carriers for subscriber access to its BlackBerry server infrastructure. As wireless operators face customers’ requests for reduced monthly charges, it becomes harder for those carriers to pass on the subscriber fee, said Kanade at Northern Securities in Toronto.
Spokespeople for AT&T and Verizon Wireless, BCE Inc. and Rogers Communications Inc., the two largest carriers in the U.S. and Canada respectively, declined to comment on the nature of any discussions they hold with RIM.
“RIM intends to continue generating a revenue stream from the services we offer,” said Nick Manning, a spokesman for Waterloo, Ontario-based RIM. He declined to elaborate on any requests for fee reductions cited by the company in last week’s earnings release.

Lower service fees in emerging markets, where RIM is increasingly reliant for growth as U.S. sales tumble, also pose a threat to business margins, said Kanade.
For now, it’s still a growing part of the business as RIM’s subscriber numbers rise, helped by increasing sales in markets such as Indonesia and South Africa. Revenue from those fees and other services climbed 4.1 per cent last quarter from a year earlier as device sales plunged 57 per cent. That lifted services’ share of total revenue to 36 per cent last quarter from 20 per cent the year before.
The fee revenue is expected to drop to $2.7 billion in fiscal 2014 and $2.3 billion in fiscal 2015, according to another estimate from Sanford C. Bernstein Ltd. analyst Pierre Ferragu.
While that may still give RIM enough cash to last two years, that doesn’t mean the company can afford to burn through its reserves, Kanade said.