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Disney to halt U.S. mobile phone service

Walt Disney Co said it would stop operating its U.S.-based mobile phone service at the end of the year.
/ Source: Reuters

Walt Disney Co said on Thursday it would stop operating its U.S.-based mobile phone service at the end of the year to reassess how it competes in a tough market for high-end cell phone services.

Disney said it would serve and support current customers of the service, with Family Center features that allow parents to display the location of a child's phone on a map and monitor its use, until December 31.

Disney Internet Group President Steve Wadsworth said in a statement the company found the business to be "a difficult proposition in the hyper-competitive U.S. mobile phone market."

A spokesman said 120 Internet Group employees would be affected by the shutdown. The number of layoffs was not yet known because the company was trying to find jobs for the affected workers within Disney.

The spokesman would not comment on the closure's financial impact or on the total number of subscribers to the service, which was offered on network space rented from Sprint Nextel Corp  on specially designed handsets.

Disney took a $30 million charge last year when it shut down Mobile ESPN, which had also been run by Disney on space rented on Sprint's network.

Disney's offerings were among a slew of upstart services renting space on established providers networks to target niche markets such as families with young children or young adults.

While one youth-focused service, Amp'd Mobile, went bankrupt during the summer, another, Virgin Mobile USA, which has been around since July 2002, is expected to make its stock market debut in a matter of weeks. Virgin, a venture of Sprint and Richard Branson's Virgin, also uses Sprint's network.

Disney's TV sports channel ESPN this year struck a license deal for Verizon Wireless, a venture of Verizon Communications Inc and Vodafone Group Plc, to carry ESPN's mobile application which delivers sports data to phones.

Disney said it would offer rebates to eligible customers for the handset, content and accessories purchased directly from the company.

SMH Capital analyst David Miller said the closure "is not something that affects the stock price."

"It's almost kind of immaterial. It was not something that made or lost money for them but probably something heading in a direction that the margins were not acceptable for Disney," Miller said.