Blockbuster Is Said to Begin Selling Phones

Dish Network Corp. (DISH)’s Blockbuster will begin selling mobile phones in its movie-rental stores as a test for Dish’s planned entry into the wireless business, according to two people with knowledge of the matter.

Blockbuster recently started selling phones on its website under the banner “Blockbuster Mobile,” working with carriers such as Verizon Wireless, Sprint Nextel Corp. (S) and T-Mobile USA. The effort will soon shift to Blockbuster’s roughly 850 retail locations, said the people, who asked not to be named because the plan hasn’t been announced.

For Dish, a satellite-TV service provider that acquired the Blockbuster chain last year, the move may be a prelude to offering its own mobile-phone service. Dish has acquired a swath of wireless airwaves and is awaiting rules from the Federal Communications Commission governing how it can use them.

Dish has planned on using Blockbuster stores to sell phones since buying the chain in April 2011, Chairman and co-founder Charlie Ergen said in October. The stores continue to rent and sell DVDs, and Dish already uses the locations to market its satellite-TV service.

Bob Toevs, a spokesman for Englewood, Colorado-based Dish, declined to comment on the plan, as did Michael Kelly, Blockbuster’s president.

Wireless Challenges

Ergen said in October he plans to team up with another company to help Dish introduce its wireless service. Discussions with potential partners are on hold until Dish hears from the FCC, Chief Executive Officer Joe Clayton said in an interview yesterday.

“Wireless will complement all of our technologies and allow us to be in more places and offer more of our services on one bill,” he said.

Offering its own wireless service would pit Dish against entrenched competitors -- including AT&T Inc. (T) and Verizon, which control more than half the U.S. market. While Dish may be able to join forces with an existing carrier, those efforts have been delayed by industry consolidation.

T-Mobile and MetroPCS Communications Inc. announced plans to merge in October, and Japan’s Softbank Corp. agreed to take control of Sprint less than two weeks later. The deals may hamper discussions on a Dish partnership, Executive Vice President Tom Cullen said during a conference call in November.

The major carriers also have more retail firepower than Blockbuster, which shrank to a fraction of its original size after the rise of Netflix Inc.’s mail-order service and streaming online video. Combined, AT&T and Verizon have more than 4,000 stores.

Dish has closed about half of the 1,700 Blockbuster stores it acquired when it bought the company out of bankruptcy last year. When Blockbuster was owned by Viacom Inc. in 2004, it operated about 9,000 locations.

To contact the reporter on this story: Alex Sherman in New York at asherman6@bloomberg.net

To contact the editor responsible for this story: Nick Turner at nturner7@bloomberg.net

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