T-Mobile's Threats to Cable Are All Bark & No Bite, Says New StreetT-Mobile's Threats to Cable Are All Bark & No Bite, Says New Street
T-Mobile has boasted that it will pose a major threat to the nation's cable companies if it is able to merge with Sprint. But the Wall Street analysts at New Street Research aren't buying that argument.
April 2, 2019
Although T-Mobile has framed its plans to launch in-home broadband Internet services as a major threat to the cable industry, some Wall Street analysts aren't buying it.
"Home broadband is one of the most un-competitive industries in existence. The New T-Mobile & 5G can and will change all that," T-Mobile CEO John Legere boasted last month of the company's plans to launch fixed wireless services across the country.
But the analysts at New Street Research don't believe cable companies need to be worried. "The impact of T-Mobile capturing home broadband share is immaterial to fixed broadband companies generally, and cable companies in particular," they wrote in a recent report to investors.
At the heart of the issue are T-Mobile's efforts to consummate its proposed merger with Sprint. The company has argued that, if it is able to acquire Sprint's extensive 2.5GHz spectrum holdings, it will not only challenge AT&T and Verizon in the mobile 5G market but will also use the spectrum to launch a 5G in-home Internet service that will directly compete against services from wired Internet providers like Comcast and Charter.
"The New T-Mobile is coming for you, Cableopoly," T-Mobile's Legere bragged of the company, dubbed "New T-Mobile," that would be formed through the combination of Sprint and T-Mobile. "You've been warned!"
But the New Street Research analysts said that they crunched the numbers -- in terms of customers' in-home Internet demands, wireless network capacity and market pricing and dynamics -- and found T-Mobile's threats to be mostly bravado with little substance. "Our analysis demonstrates that, while T-Mobile's merger with Sprint will create significant capacity for pro forma T-Mobile that will make them a formidable competitor in the wireless market, the opportunity for them in home broadband is small, and the threat they pose to existing broadband providers is smaller," they wrote.
Specifically, the New Street analysts concluded that the combination of Sprint and T-Mobile would only have enough network capacity to support 7.6 million total in-home Internet subscribers -- the firm said T-Mobile estimates the average household will consume around 500GB per month in 2024, but the New Street analysts believe it will be more than double that figure based on the growth of streaming video. Further, the analysts predict that T-Mobile will only be able to sign up around 5.3 million subscribers -- roughly 4% of the market -- to its home Internet service by 2024.
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