Comcast and Charter Communications will kick-start their just-announced partnership for all things wireless by conducting joint negotiations on a possible venture with No. 4 U.S. wireless carrier Sprint, the Wall Street Journal (sub. req.) reported.
According to the paper, Sprint Chairman Masayoshi Son and the top two U.S. cable companies have agreed to an exclusive two-month negotiating window that will close in late July—which suggests the two sides are already talking.
Representatives for Comcast and Charter have yet to respond to FierceCable’s inquiry for confirmation and comment.
A possible outcome, the report said, would entail Comcast and Charter jointly investing in Sprint’s network, and gaining access to a nationally distributed wireless infrastructure at better terms than the MVNO deal both cable companies currently have with No. 1 carrier Verizon.
Another possibility, the paper said, was for Comcast and Charter to jointly buy Sprint, which has a market value of around $32 billion in net debt.
In early May, Comcast and Charter announced a partnership in which each company would maintain separate wireless services, but share technology and information on best practices in terms of marketing, pricing, back-office infrastructure, etc. They also agreed to combine leverage in negotiations with wireless vendors, such as handset manufacturers.
According to the Wall Street Journal, Charter’s largest investor, telecom baron John Malone, has been working Comcast Corp. CEO Brian Roberts for more than a year, urging him to partner up with Charter and buy Sprint.
Roberts is reportedly reluctant to go all in with a major piece of M&A, preferring to merely secure better network reseller terms for Comcast’s existing just-launched wireless service.
Charter Chairman and CEO Tom Rutledge, meanwhile, has stated that purchasing a wireless operator makes sense at the “right price and right owners’ economics.”
As WSJ also noted, the report comes as Altice USA is coming off a particularly robust IPO in which it raised $1.92 billion to fund further M&A. CEO Dexter Goei has specifically noted the U.S. cable arm also has wireless ambitions.
The strategic benefits of a three-way merger between Sprint, Comcast and Charter “could be really compelling,” said New Street Research Analyst Jonathan Chaplin.
“The cable companies have 17 million Wi-Fi nodes today en route to 20 million. What if they repurposed those as small cells for licensed spectrum? The deployment challenges that Sprint has faced with 2.5GHz would evaporate pretty quickly. Perhaps more importantly, this would put the companies on a path to densification for 5G that would be leagues ahead of the rest of the industry (globally). The Wi-Fi nodes are just part of the story; Sprint and cable companies have been testing strand mounted small cells that would further facilitate densification for 2.5GHz and ultimately for 5G.”
Jefferies Analyst Mike McCormack, meanwhile, said it's unsurprising that Comcast and Charter are interested in talking to Sprint.
“For one, the current MVNO with Verizon restricts cable offerings to their respective footprints, whereas Sprint could allow the MSOs to offer service nationally,” he said. “Second, the Verizon deal was established several years ago, when data usage was much lower, and likely did not contemplate today's unlimited offerings. Past conversations with the cable providers noted a desire to explore alternative arrangements, perhaps giving Cable more customer control. Given Sprint's competitive positioning, we believe Cable likely has meaningful leverage in any negotiations.”