Top cable operators Comcast and Charter will benefit from the collapse in merger talks between Sprint and T-Mobile, but not so much because the availability of the Nos. 3 and 4 U.S. wireless companies makes it more likely for the Nos. 1 and 2 cable companies to enter into a deal themselves, MoffettNathanson analyst Craig Moffett said.
“A four-player [U.S. wireless] market is good news, on the margin, for Comcast and Charter, albeit less because of ‘deal optionality’ for either one than because it creates a more hospitable dynamic of their wireless MVNO with Verizon,” Moffett wrote in a note to investors this morning.
Charter said it will launch a wireless service combining its public Wi-Fi reach and a wholesale network usage agreement with Verizon in 2018. However, Comcast’s early success in wireless suggests that both companies would benefit from the incumbent markets keeping the status quo, Moffett explained.
Comcast reported that it added 250,000 customers in the third quarter to its MVNO-based wireless service, amounting to 18% of net customer additions for the U.S. wireless industry.
“Comcast appears to have landed on a potentially significant unsent market need, and as such, their offering could turn out to be rather disruptive,” Moffett said. “The vast majority of Americans clearly want unlimited plans (we’ve seen numbers as high as 90%). But Comcast has seemingly found a niche serving the relatively unserved minority who would prefer a low-price-per-GB ‘metered’ plan. Their pricing attacks an important profit pool for the carriers; light users who pay average prices for far-below-average usage.”
Moffett, meanwhile, called the scuttling of the latest Sprint/T-Mobile dalliance “mixed” for Dish Network.
"Yes, here too, there is some marginally higher probability of a deal, but only marginally higher,” he wrote. “In the more likely eventuality of network construction, Dish would be building into a five-player market."