A $1.8 billion line item on Comcast’s third-quarter cash flow statement represents a deposit for the MSO to participate in the FCC’s incentive spectrum auction, multiple analysts said.
“While the company has not confirmed that this is for the auction, the large cash payment showed up in a new category within the investing section called ‘deposits,’" wrote BTIG Research analyst Walter Piecyk in a blog post (reg. req.). “A $1.8 billion auction deposit would enable Comcast to purchase 30 MHz of spectrum on a nationwide basis. Most investors were expecting Comcast to bid on no more than 10 MHz of spectrum, if any at all. The revelation comes as AT&T, the largest Pay TV operator in the U.S., is about to launch an OTT video service for $35/month that leverages its wireless network, potentially increasing the pressure on cable operators to re-evaluate their wireless strategies."
MoffettNathanson analyst Craig Moffett added, “That deposit confirms their eligibility to bid in the incentive spectrum auction.”
The deposit is refundable, Piecyk noted, and it doesn’t necessarily confirm that Comcast is determined to buy spectrum. Comcast reps didn’t immediately respond to FierceCable’s inquiry for comment.
But to a degree, the alleged deposit could be interpreted as undermining Comcast CEO Brian Roberts’ statement Tuesday during the MSO’s third quarter earnings call, when he said the company’s MVNO wholesale agreement with Verizon was, in and of itself, enough to launch Comcast’s upcoming wireless service.
“Given management’s insistence on the benefits of executing a resale strategy for wireless, it should certainly raise some eyebrows as to why they would qualify to bid for that much spectrum," Piecyk said. “Keep in mind that this payment was made less than four months ago. As we all await the details of AT&T’s DirecTV Now offering, the flexibility provided by that deposit offers, might come in handy.”
Comcast, which has stated plans to launch a wireless service in 2017, said it will be backboned by its wholesale agreement with Verizon, signed back in 2011, and augmented by the MSO’s network of around 15 million Wi-Fi hotspots.
“The terms of the Verizon agreement are not only dated, but are with a wireless operator that has questionable network capacity as we head into a data hungry mobile video era,” Piecyk added. “Verizon insists that it will not offer unlimited data, possibly because of their inability to handle the resulting traffic growth from their 114 million customers.”
Correction: This story was updated at 2:15 p.m. on Oct. 28 to correct the size of the deposit.