Verizon And Sprint: Cat Fight Over Google (GOOG) Phone?

Verizon Wireless, a JV between Verizon (VZ) and Vodafone (VOD) appears to be vying with Sprint (S) over rights to distribute new handsets loaded with the Google (GOOG) mobile OS and goodies like the search company’s maps, g-mail, and YouTube.

According to The Wall Street Journal "a Google technology partnership might let the carriers offer cheaper phones, because Google’s licensing fees for its software and operating system would likely be less than the industry standard." But, that seems counterintuitive. Why would wireless carriers want to sell cheap phones? Probably they won’t.

But, the chance to pick up a product that might rival AT&T’s (T) distribution of the Apple (AAPL) iPhone may be too difficult to resist, And, the Google phone will have an open software architecture which means that a carrier may be able to create and install its own applications. That could add value to the product and drive a higher price point.

The fact of the matter is that Verizon Wireless may not need the product at all. It would do a deal with Google to keep the product out of the hands of Sprint, but the Verizon third quarter numbers indicate that ii is doing very well against arch-rival AT&T. Verizon has also been fighting with Google over the terms under which the FCC should auction its newly available wireless spectrum. It is unlikely that those differences will disappear due to a handset deal.

Sprint, on the other hand, needs a product like the Google phone. And, it needs it badly. The company lost its CEO over poor performance. Customer satisfaction has been awful since the company’s merger with Nextel and subscriber growth has been moribund. The company is trying to launch a nationwide WiMax network for next generation wireless broadband. Having a signature product could help that.

Look for Sprint to do whatever it has to so that it can be the Google phone distribution network. And, look for Google to march into a new market with a partner which already has over 50 million subscribers.

Douglas A. McIntyre