Comcast, Charter Strike Wireless Partnership -- Update
May 08 2017 - 11:29AM
Dow Jones News
By Dana Mattioli and Shalini Ramachandran
Comcast Corp. and Charter Communications Inc. have struck a
wireless partnership as the cable giants look to get a piece of the
cutthroat business.
As part of the deal, which The Wall Street Journal first
reported Sunday, Comcast and Charter have agreed not to make a
material merger or acquisition in wireless without the other's
consent for one year.
That agreement could stoke Wall Street speculation among
investors and analysts that the two largest U.S. cable companies
together could decide to make a play for a carrier like T-Mobile US
Inc. or Sprint Corp. Neither company as a single entity could buy
another wireless carrier for that time period as a result of that
agreement without the other's blessing or involvement.
Wireless carriers are fighting it out in a fierce price war,
while cable companies like Comcast and Charter are dealing with a
saturated pay-TV business under assault from threats like
cord-cutting and cheaper online video services.
The cable companies view wireless phone service as an
opportunity to create a new product to make their bundles more
appealing and better retain existing customers. They hope that by
offering a "quad play" of cable TV, home internet, landline phone
and wireless service, customers will be less likely to drop their
service and jump to a rival.
Comcast recently released plans to offer a wireless service to
its customers and purchased airwaves that could be used to help
offer it in a government spectrum auction.
Charter has said it would offer wireless service as soon as next
year. Both plan to rely on a five-year-old agreement with Verizon
Communications Inc. that allows them to resell Verizon's airwaves
to offer cellphone service to their cable customers. Comcast plans
to start offering its mobile service to customers as soon as later
this month.
Comcast and Charter say that their wireless partnership was
motivated in part by the possibility of "further consolidation
among national wireless competitors." Types of deals covered by
their truce include "any acquisition, merger or other transaction"
where a deal would result in the acquisition of at least 50% of the
voting power or assets of either company, according to a regulatory
filing.
That means that if Charter were to want to sell to Verizon, it
would need Comcast's blessing or involvement to do so. The Journal
had reported earlier this year that Verizon was exploring such a
combination. Charter shares fell 2.9% in midmorning trading
Monday.
The new operational partnership will allow Charter and Comcast
to share technology and work together to use their combined scale
in vendor negotiations with the likes of Samsung for handsets, for
instance, one of the people said. However, the two companies will
keep their customer-facing wireless storefronts and mobile plans
separate.
The idea is that the partnership will allow the companies to
share what they learn about what works and what doesn't in service
plans and back-office billing operations, as well as achieve
potential cost efficiencies. It could also help the two advance
development on how to take advantage of their network of millions
of Wi-Fi hotspots to bolster their wireless service. Today, handing
off a voice call between a W-Fi hotspot and cellular remains
clunky.
"By working with the team at Comcast, we can not only speed
Charter's entry into the marketplace, it will also enable us to
provide more competition and drive costs down for consumers at a
similar national scale as current wireless operators," Charter
Chairman and Chief Executive Tom Rutledge said in a statement.
The companies also agreed that they would only work together
with respect to other commercial arrangements with the national
wireless carriers, such as in wireless airwave reseller deals like
the one they already have with Verizon.
The cable companies will also likely explore working closer
together to gain scale in wireless and digital advertising as a
result of the partnership, a person familiar with the matter said.
Rivals AT&T and Verizon have openly discussed their interest in
making a bigger play there, as juggernauts Google Inc. and Facebook
Inc. are sucking up the majority of digital ad dollars. Comcast and
Charter already collaborate in local cable ad sales.
Comcast and Charter will each still only offer wireless service
to customers within their respective cable footprints -- not
nationwide, the person said. However, their mobile plans' coverage
will be nationwide.
The M&A truce between the two companies covers any "material
transaction" in the area of cooperation, which includes
"investments, acquisitions, mergers, partnerships, joint ventures
or similar transactions" with a value over $50 million with any
carrier. It also covers spectrum purchases with a value of more
than $200 million.
Charter and Comcast have also agreed to a potential "out" from
their one-year truce. If the two parties can't come to terms on a
joint deal with a national carrier, they can engage in discussions
on their own with a carrier even within the one-year time frame, if
they've offered their partner cable company similar terms and the
cable company doesn't accept, according to a regulatory filing.
Write to Dana Mattioli at dana.mattioli@wsj.com and Shalini
Ramachandran at shalini.ramachandran@wsj.com
(END) Dow Jones Newswires
May 08, 2017 11:14 ET (15:14 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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