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MetroPCS Communications Inc. , one of the leading prepaid operators in the U.S., is expanding its 4G portfolio with the launch of China-based telecom solutions provider Huawei Technologies Co Ltd’s Activa 4G LTE device for all its customers. We believe that this is an attempt to compete with the continuous launch of smartphones at affordable prices by its rivals.

Although, Activa 4G is Huawei’s first 4G LTE offering in the U.S. market, it’s the fourth of its kind from MetroPCS’s stable. The smartphone comes at a price tag of $149.99, which makes it the cheapest LTE offering from the company. The feature rich device, which runs on Google Inc’s older version of Android operating system, comes with a 5 megapixel camera along with single LED flash and a front facing VGA camera. The most significant part of the agreement is that it comes without a contract unlike other high-end phone offerings from postpaid carriers.

The launch is significant for both the companies. The agreement will help Huawei to improve the sales of its high-end smartphones outside its home market. On the other hand, Metro PCS Communication customers will benefit due to the availability of feature rich 4G LTE devices at attractive price points. 

Recently, rivals Leap Wireless International Inc and Sprint-Nextel Corp (S - Analyst Report) have launched a pre-paid version of Apple Inc’s (AAPL - Analyst Report) iPhones at attractive price points. Moreover, they are also offering the service without any contract coupled with unlimited data usage.

We believe that the growing attractiveness of the prepaid market based on its no contract advantage along with competition from other pre-paid carriers has forced MetroPCS Communication to come up with such an offering. Additionally, the higher data transferability of LTE technology will increase the demand for LTE devices, which in turn can help MetroPCS Communication.

Recommendation:

We are maintaining our long-term Neutral recommendation on MetroPCS Communication Inc. Currently, MetroPCS Communication Inc. has a Zacks #4 Rank, implying a short-term sell rating on the stock.

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