T-Mobile's replacement for RadioShack: 7-Eleven

T-Mobile USA is replacing the outlets that will be lost when RadioShack switches to Verizon Wireless, and early today announced that its first new partner is 7-Eleven.

T-Mobile and 7-Eleven said that, as of yesterday, consumers can buy prepaid handsets at the convenience store chain. The partnership signals T-Mobile's increasing presence in the prepaid area; 7-Eleven is already known for selling prepaid phones and calling cards.

While the partnership gets T-Mobile in 8,800 7-Eleven stores in North America, it is a poor replacement for RadioShack. RadioShack said last week it would begin selling Verizon Wireless products and services in September. Despite disappointing earnings, the company's stock rose on the news.

T-Mobile, meanwhile, said the decision to break with RadioShack was its own, and that it would find retail outlets to replace the RadioShack locations.

Over the past few years, RadioShack has shown itself to be a stronger driver of customer growth. Most importantly, it helped drive contract customer growth, something T-Mobile has struggled with. In the third quarter of last year, T-Mobile raised the credit standards on customers who signed up through RadioShack, hurting the retail chain's ability to add new customers. As a result, T-Mobile saw a higher decrease in customer growth there than at other outlets.

While the 7-Eleven deal will bring T-Mobile new customers, they won't be signing a contract, or even buying a smartphone. T-Mobile will sell its prepaid handset, the GS170 from LG Electronics, which is a basic flip cell phone, for $29.99.

"Industry projections indicate that prepaid service will continue its growth trajectory and is expected to comprise a significant portion of the wireless market within the next several years," said Amy McCune, vice president of national retail for T-Mobile.

The introduction of a nationwide brand will be a boon to 7-Eleven stores, which augments an existing offering of prepaid services.

"We were one of the first in our industry to offer prepaid phone service and continue to see an opportunity to provide customers with easy and accessible wireless service, which is why we've looked to T-Mobile to expand our prepaid handset offerings," said Jesus Delgado-Jenkins, 7-Eleven's senior vice president of merchandising, marketing and logistics. "To give you an idea of how many prepaid transactions we conduct, consider that if all the prepaid cards sold on an average day at 7-Eleven stores were placed end to end, they would span more than 30 football fields."

Still, 7-Eleven won't be enough to replace RadioShack as an outlet to drive smartphone growth, which is T-Mobile's real aim.