Cable’s entry into the wireless business has become a little more complicated now that top operators Comcast and Charter Communications plan to “explore potential opportunities for operational cooperation,” and Altice USA has said it would entertain reseller relationships with carriers.
Comcast and Charter each already have a Mobile Virtual Network Operator (MVNO) agreement with Verizon that essentially allows them to resell service over Verizon’s network under their respective brand names. Altice USA, a unit of European telecom company Altice N.V., has affirmed it would be open to a similar deal.
The Comcast-Charter partnership comes as a bit of a surprise because both companies seem to be at different stages of their wireless product development.
Comcast unveiled its wireless offering — Xfinity Mobile — in April, a product more geared toward pricing and data consumption flexibility. With Xfinity Mobile, consumers could buy unlimited data plans or subscribe on a pay-as-you-go basis.
Charter, which inherited its Verizon MVNO after the MSO purchased Time Warner Cable, doesn’t expect to launch a product until 2018 and has offered few details about its plans. In the past, though, chairman and CEO Tom Rutledge has hinted that Charter’s wireless product could be geared more toward 5G technology.
ADDING STICKINESS TO THE BUNDLE
Cable’s mobile play seems to be geared more toward customer retention than an effort to be the fifth competitor in a five-player market. Coupled with broadband and WiFi, a competitive wireless product could make existing cable customers even stickier.
Analysts initially seemed more concerned about what the Comcast- Charter partnership prevented — each side said it would not make a major wireless acquisition for one year without the other’s approval — than what it allowed.
Most saw that provision as squashing speculation that Comcast or Charter would buy a wireless company, such as Sprint, T-Mobile or even Verizon.
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One analyst, Kannan Venkateshwar of Barclays, noted that Charter’s largest shareholder, cable deal maven John Malone, once said cable companies should jointly purchase a wireless provider.
While that could point Charter and Comcast toward a joint wireless purchase, Venkateshwar said such a deal is probably unlikely. More possible, he added, is that wireless players, and even Dish Network, look more closely at deals.
“Overall, the risk at present is that despite speculation over the last few months around M&A, there is a risk that the process becomes a staring contest with no one choosing to move first,” Venkateshwar wrote in a research note. “We believe the degree of urgency is likely to be felt most by those feeling the greatest degree of competitive pressure — i.e., Sprint and Verizon. With cable seemingly out of the wireless M&A landscape for now, T-Mobile and Dish could become the focus of M&A conversations.”
Just what the partnership will bring to both companies’ offerings is unclear. Comcast and Charter talked about efficiencies in buying equipment, using the same billing systems and creating common operating platforms. But it would be pretty remarkable if Comcast, which started beta-testing Xfinity Mobile with employees in April and is expected to fully launch the product throughout its footprint next month, didn’t already have those things in place.
Comcast is a member of the Cable WiFi roaming consortium, a group that included Cox Communications, Time Warner Cable, Cablevision and Bright House Networks when it was created in 2012. Customers of the companies within Cable WiFi can access the WiFi networks of member companies when they travel outside of their respective footprints. Charter joined the group after it purchased TWC and Bright House last May.
Overall, analysts were encouraged by the Comcast- Charter pact, if only as proof that the cable companies, which have stumbled with wireless partnerships in the past, were serious this time.
MoffettNathanson principal and senior analyst Craig Moffett blogged that “it would have been crazy for the two companies not to pursue the wireless business together” and said a key part of the deal is the ability to hand off cellular calls from the Verizon MVNO network to the WiFi networks of both cable companies.
“The economies that come with offloading traffic onto owned-and-operated facilities, particularly in their respective WiFi footprints, are the critical basis of sharing, but operationalizing that requires integration of technology plans, network design, etc.,” Moffett wrote. “As part of the agreement, each will ensure that their respective economics are optimized. This is precisely the agreement we always expected.”
GOEI: ALTICE IS ‘VERY MUCH IN LINE’
Altice USA, which in April filed preliminary documents with the Securities and Exchange Commission for an initial public offering, has said in the past that it would be open to an MVNO agreement with a wireless provider. CEO Dexter Goei reiterated that stance last week.
Altice has other priorities, though, mainly in integrating its most recent purchases: Cablevision Systems last June and Suddenlink Communications in December 2015.
On a call with reporters Goei said he admired the Comcast-Charter partnership but Altice is taking its time.
“We said on our last earnings call that we would have discussions around MVNO,” Goei said. “Longer term, are we interested in more fixed infrastructure? I think it’s unclear. We are very much in line with our cable brethren here in terms of taking our time to evaluate what our options are on wireless.”
