We’re going to say it before anyone else thinks of it, just in case Comcast and Charter turn out to have the audacity to take a shot at it. Why don’t they plot to bring down and acquire Verizon, not T-Mobile US?
That’s right we’ll more or less come right out and say it. Comcast and Charter partnering on wireless strategy may not have the outcome everybody thinks. You have to think about the timeline to see it. Instead of working together starting to build momentum in wireless and then buying either Sprint or T-Mobile to sit at the foot of the US cellular tree. They may well find that their MVNO partner Verizon is doing so poorly that they can in fact partner together to acquire it in 18 month to two years from now.
Were the $180 billion valuation of Comcast to rise and the $100 billion valuation of Charter also, then they would dwarf the target Verizon valuation, especially if it lost 10% to 15% over the coming year or so.
While the financial community cannot see what’s right in front of them, i.e. that fixed lines are a rising tide, and wireless is about to go commodity, all the talk has been about Verizon buying Charter. Faultline Online Reporter said at the time that this was nonsense, and the statement surrounding the wireless agreement now confirms it.
Neither party is to look at wireless acquisitions or disposals for at least a year, certainly nothing larger than $200 million and neither is supposed to enter any kind of wireless partnership, unless they both enter one together. They certainly cannot talk about selling or buying anything with any of the national cellular operators as their side agreement signed this week prohibits it.
Note this does not mean they cannot buy smaller local operators as they join the party to get into wireless rollups.
But the key things are the areas where they will partner, common billing and operating platforms, technical standards development and harmonization, handset and tablet device life cycle management, logistics and emerging wireless technology platforms. This is like CableLabs in wireless. Think of it as WirelessLabs. It may end up as a major contributor in future technology generations such as 5G, and it could even rival the guidance that the 3GPP brings to global wireless at some future point.
Comcast has traditionally cooperated with Time Warner Cable – for instance RDK came out of a cooperation between them. So, this is really extending what has been an even closer relationship between them that the one they have with CableLabs, and extending it to wireless.
Faultline Online Reporter has been saying for some years, as we have followed the creation of 16 million Homespots by Comcast, anticipating a WiFi First style cellular service, that all of cable, because of its lack of overbuilding, may join up under the same brand to take on the large US MNOs with one major cellular operator.
Now Comcast has not said that it will allow Charter to use the brand Xfinity, and it is more likely to focus on Spectrum – its own combined branding approach to top end offerings. But if each of the brands had a common sub-brand such as powered by XYZ – and if they choose also use other sub-brands like the Comcast owned Canoe Ventures or Freewheel, then there could be some commonality of experience and all that would be needed is to partner with more US cable firms to create what is a new national brand.
Additionally, its advertising can be programmatic across multiple video experiences and that might allow a common Wireless system to get to advertising critical mass sooner.
How would the FCC respond to such partial brand sharing, or system sharing? Well under Donald Trump’s government, it would react highly favourably, and neither company could be considered as dominant in wireless. In fact, they would be the underdogs, that is until they have stolen their first few million subscribers each, and begin to make Verizon, AT&T and Sprint’s efforts look stale. We think they can do that.
At that point, some enterprising financial analyst might tot up the likely numbers 5 years out and put it into their respective share prices and just as the two cable monoliths begin to muscle up financially, an ailing Verizon (due to smartphone saturation) might be asked if it is happy to lose a few million customers and the further effect it will have on its share price, or maybe consider a transaction where the two cable firms bought Verizon and took over joint management.
As we say it is just a thought. The originality of offering, the low WiFi First based pricing and the internal authentication systems all have to work and work well before any of that can be considered. And Verizon has to stutter and weaken in the post Smartphone era. But if that all comes to pass, look out for Cable America starting to think really big.