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BlackBerry severs sales ties with T-Mobile US

A T-Mobile branded BlackBerry smart phone is pictured in Hoboken, New Jersey, March 20, 2011. REUTERS/Gary Hershorn
A T-Mobile branded BlackBerry smart phone is pictured in Hoboken, New Jersey, March 20, 2011. REUTERS/Gary Hershorn

By Euan Rocha

TORONTO (Reuters) - BlackBerry Ltd said it would not renew a deal allowing T-Mobile US Inc to sell its products, a gamble by the smartphone maker as it struggles to stabilize its business under an aggressive new chief executive officer.

The move comes just six weeks after a public spat between the two companies, as T-Mobile offered its customers the Apple iPhone 5s for free in February and touted the promotion as "great offer for BlackBerry customers."

A backlash to the iPhone offer prompted T-Mobile US Chief Executive John Legere to respond, assuring Blackberry and its users of his company's support. Chen, in a blog post at the time, criticized T-Mobile for running the promotion.

In a statement late Tuesday, BlackBerry said it would continue to provide service to existing customers on T-Mobile's network or those who buy products from the carrier's remaining inventory.

"BlackBerry has had a positive relationship with T-Mobile for many years," BlackBerry Chief Executive John Chen said in a brief statement. "Regretfully, at this time, our strategies are not complementary, and we must act in the best interest of our BlackBerry customers. We hope to work with T-Mobile again in the future when our business strategies are aligned."

BlackBerry did not elaborate on why it was ending its relationship with T-Mobile U.S., the fourth-largest wireless carrier in the United States. T-Mobile could not immediately be reached for comment.

The phone maker said it was working closely with other carrier partners to provide users with alternatives in case they decide to switch from T-Mobile.

The three largest U.S. wireless carriers - Verizon Wireless, AT&T Inc and Sprint Corp - continue to sell BlackBerry devices.

MARGINS SQUEEZED

The decision highlights a more combative stance since Chen took charge of the Waterloo, Ontario-based company late last year, and a focus on cutting costs in its sales channel.

During a roundtable with media at BlackBerry headquarters last week, Chen said the company had done much of the internal cost-trimming he had targeted when he took charge in November, and further cuts would come within its sales channels.

"Now I am onto the next part of the cost (cutting), which is the distribution costs of our product," he said at the time.

Chen didn't provide details but hinted that some of the company's carriers and distributors were getting a significant cut on the devices sold, which was squeezing its profit margins.

BlackBerry had dominated the smartphone market until about four years ago, but its market share has dwindled as it failed to keep pace with Apple Inc's iPhone, Samsung Electronics Ltd's line of Galaxy devices and devices powered by Google Inc's Android operating system.

A new line of BlackBerry 10 devices introduced last year flopped, and Chen has begun to shift the company's emphasis away from hardware sales and toward managing smartphone services.

(Additional reporting by Arnab Sen in Bangalore; Editing by Bernadette Baum)

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