Cable Operators Plot Wireless Strategy
If cable companies move into wireless through a consortium, they're most likely to do so initially as resellers of services offered by Sprint and other operators rather than as new entrants in spectrum markets, sources said Mon. Financial analysts said several questions remain about whether cable operators -- which carry significant debt after years of rebuilding their systems -- would want to invest heavily now in buying the spectrum needed to become a national wireless operator.
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Alternatively, cable companies could pursue the purchase of one of the 5 national wireless carriers, but that would raise similar financial issues. The cable consortium appears to be at least in part a reaction to Bell moves into video. The Wall St. Journal reported Mon. that cable operators Comcast, Time Warner, Cox, Charter and Advance/Newhouse were the first members of a wireless consortium.
UBS Cable Analyst Aryeh Bourkoff said reseller arrangements were more likely than an acquisition. “Sprint, which has signed several agreements with cable companies to manage the rollout of their fixed line telephony efforts and also has wireless resale agreements in place with AT&T and Qwest among others, could be a likely candidate to provide the cable companies with a wireless presence to compete against the Bell voice, data, video and wireless” array, UBS said in a research note.
Legg Mason analyst Rebecca Arbogast expects cable to move cautiously but to feel the need to offer wireless as part of a bundle of services. “Going forward we think the big competition is going to be this battle of the bundles between the Bells on the one hand and cable on the other,” Arbogast said. “The only thing [cable operators] are really lacking is the wireless piece. My sense is they're probable going to incrementally try different strategies.” As a model, Arbogast cited the “gradual” and “cautious” move of cable operators into voice as VoIP providers. She added that since the Bells will take a while to roll out video cable operators will likely feel they have time.
Jeffries Analyst Richard Klugman noted that cable operators had a history in wireless, with Comcast, Cox and TCI original partners when Sprint PCS was formed 10 years ago. Klugman said cable already offers a better single package than the Bells under one brand. Bell packages usually include wireless -- through a provider the carrier only partly owns -- and video from a 3rd provider, which all comes across as a “convoluted combination,” he said. “It’s a question of whether it makes sense for the cable companies to get into wireless… unless they start losing customers to Bell companies because they offer a more complete package.”
Jessica Zufolo, an analyst with Medley Global Advisors, said she expected to see cable operators enter reseller deals rather than attempt to compete through a new offering. The entry of the Bells into video is forcing the hands of cable, she said. “They've been trying to plan a strategy to get into wireless because everybody knows that wireless is the fastest growing part of the telecom business,” she said: “Now that it’s clear that the Bells are getting into video it makes perfect sense for them to get into wireless.”