América Móvil's TracFone, the largest MVNO in the US with roughly 21 million customers, announced it inked a new MVNO agreement that significantly increased its earnings. The company also reported noteworthy growth to its customer base during the second quarter.

Some Wall Street analysts believe TracFone's new MVNO deal will pave the way for Comcast and Charter to improve their own MVNO deals.

"TracFone also reported a surge in EBITDA [earnings before interest, taxes, depreciation, and amortization] margins from 9% in 2Q19 to 15% in 2Q20, mostly driven by a new MVNO agreement that lowered their cost of service," wrote the analysts at New Street Research in a recent note to investors. "We expect cable companies to show improving economics as they negotiate better MVNO terms as well."

However, the financial details of US operators' MVNO agreements are generally carefully guarded secrets, so it will be difficult to discern whether TracFone's new MVNO rate will be immediately available to Comcast and Charter. The New Street analysts noted that TracFone's MVNO service primarily piggybacks on the networks of AT&T and Verizon. Comcast and Charter use Verizon's mobile network.

A clue may be released later this month when Verizon and AT&T issue their quarterly earnings. If one of them reports a jump in wholesale MVNO customers, that may reflect that they're providing better MVNO terms.

"We will be watching results closely to see if one of these companies was more affected than the other," the New Street analysts noted.

There are indications that AT&T is looking to steal a piece of Verizon's MVNO business. AT&T's efforts may have allowed Charter and Comcast – and possibly TracFone – to negotiate better MVNO rates.

The situation is becoming increasingly important considering cable operators are gaining ground in the mobile industry. US cable operators collectively added 547,000 mobile lines in the first quarter of 2020, raising their combined base to 3.74 million mobile lines. Meanwhile, the top incumbent mobile network operators saw their total retail phone subscriptions fall 1.3% year-on-year during that same period, according to Wall Street analyst firm MoffettNathanson.

Three of the four biggest cable operators in the US currently offer mobile services. Altice USA offers its service through an MVNO agreement with T-Mobile, while Comcast and Charter have MVNO deals with Verizon.

Further, Cox Communications – the nation's third-biggest cable operator – is working to enter the wireless industry with its own MVNO.

TracFone added 214,000 new customers in the second quarter, a reversal from the 164,000 customers it lost in the same quarter a year ago. "May was especially strong as a result of US government stimulus and additional unemployment benefits reaching a broad proportion of the population and people sought attractive communication solutions," the company wrote.

"It is too early to call a trend, but the first company to report this earnings cycle [TracFone] supports our thesis that share will shift to value offerings in a recession," the New Street analysts wrote of TracFone's results, believing that a pandemic-sparked recession will drive Americans to purchase cheaper, prepaid wireless options. "This is favorable for T-Mobile and for Dish with its recently acquired Boost business (Boost was one of the biggest winners in the last recession)."

— Mike Dano, Editorial Director, 5G & Mobile Strategies, Light Reading | @mikeddano