Liberty Media chairman John Malone said a lot of things at his companies’ rapid-fire annual meetings on Tuesday – he held four in less than an hour and a half for Liberty Media, Liberty Interactive, Liberty Trip Advisor Holdings and Liberty Broadband – but perhaps most interesting was his theory that the recent pairing of Charter Communications and Time Warner Cable could help create a third major wireless carrier to compete with Verizon and AT&T.
Malone pointed to Time Warner Cable’s MVNO deal with Verizon – part of cable consortium SpectrumCo’s sale of wireless frequencies to Verizon in 2012 for about $3.9 billion. As part of that deal, SpectrumCo’s members – TWC, Comcast, Bright House Networks and Cox – received the option of participating in a wireless MVNO cellular service from Verizon.
Malone noted that Charter was not part of that consortium – it will be after the TWC deal closes – which now becomes more important as the bulk of wireless traffic originates on the cable-dominated WiFi network.
“The concept that Comcast, a greatly enlarged Charter and Cox could together offer a WiFi-optimized connectivity service with a default to a Verizon MVNO is an interesting concept,” Malone said at the annual meeting.
That would dovetail nicely into Malone’s earlier comments that the cable industry needs to think more about mobile service, like European operators do. (Malone also is chairman of international cable giant Liberty Global).
Malone added that it’s no surprise that mobility is happening at a faster pace in Europe than in the U.S. because the U.S. cable business is fragmented and wireless is dominated by two powerful players – Verizon and AT&T.
“My guess would be that the government would be greatly pleased if there was a meaningful third alterative,” Malone said.
As far as the Time Warner Cable deal, Malone said he believes it will pass regulatory scrutiny mainly because both parties have already been through the wringer with the Federal Communications Commission concerning the terminated Comcast-TWC merger.
“There’s very little dirty underwear that anybody can find at the bottom of the suitcase,” Malone said, adding that with the AT&T-DirecTV merger headed for the finish line, the FCC doesn’t want a “Snow White and the Seven Dwarfs situation” in the cable business.
The Liberty Media chairman also is a firm believer in Charter CEO Tom Rutledge’s strategy, adding that his plan to bring simplicity to the cable business is a stroke of genius.
“If we can take truck rolls, if we take calls out of the business; we can lower the operating costs and drive up the margins,” Malone said. “We don’t have to get there by raising prices, we can get there by driving simplicity.”
He added it may take Charter three years to get there – and Rutledge will likely face criticism for it – but it will be well worth the wait.
“Everybody going to say, ‘Oh he’s spending too much capital,’ but I think the end result with be worth it,” Malone said of Rutledge. “To a large degree we’re betting on Tom Rutledge and his team to wake up a sleepy cable company that was treading water in all honesty for a while and trying to satisfy shareholders pressures with buybacks and dividends as opposed to putting the money into having a competitive service offering.”
