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Cable Tech

It looks like Verizon rescued its cable MVNO business

There are some indications that Verizon's efforts to hold onto its MVNO deals with Charter Communications and Comcast have been successful.

If that is indeed the case, Verizon may continue to derive wholesale revenues from both cable companies into the foreseeable future. More importantly, Verizon may not have to deal with the two cable companies building their own expansive 5G networks in direct competition to Verizon's existing network.

The latest indication of resilience in Verizon's MVNO relationship with Comcast and Charter has to do with the FCC's C-band auction. Bidding in the event ended earlier this month at a grand total of $81 billion, but the agency won't release the identity of the bidders until late February or early March.

No need to raise money

Comcast on Thursday provided a strong indication that it did not bid heavily in the event; the company said it expects to resume stock buybacks in the second half of 2021.

"We hadn't expected buybacks until at least 2022," wrote the financial analysts at Evercore in response to Comcast's announcement. "It's unclear whether this means management is comfortable with resuming buybacks at somewhat higher leverage, expects significant EBITDA [earnings before interest, taxes, depreciation, and amortization] improvements in 2021, is spending less on the C-Band auction than our placeholder ~$8 billion, or a combination of the three."

Other analysts agreed.

"The company will resume share repurchases in the second half of 2021 – perhaps six months earlier than previously expected," wrote the financial analysts at New Street Research of Comcast. "We think this means two things: first, they are more confident in the recovery at NBCU from here, and; second, they did not spend a lot of money in the C-band auction."

Most expect Verizon to walk away with up to $40 billion in C-band licenses, but many had predicted the joint venture between Comcast and Charter to spend $15 billion or more on C-band licenses. Doing so would have forced them to dig deep to pay for the licenses; analysts expect AT&T and Verizon to incur significant debt to finance their expected purchases.

Making due with CBRS

Comcast and Charter could have combined those C-band spectrum licenses with their existing CBRS spectrum holdings (and the 600MHz licenses Comcast owns) to build a robust 5G network that would likely have the speed and capacity to support a large number of customers transmitting plenty of data.

Without C-band licenses, though, the spectrum holdings of Comcast and Charter are probably not extensive enough to pose much of a risk to Verizon's existing 5G network.

"A single band of spectrum doesn't create a network in the context of the service you deliver to customers," Verizon's Ronan Dunne said late last year of the cable companies' CBRS holdings.

Indeed, Comcast executives during their quarterly conference call Thursday outlined their plans to construct a wireless network in their CBRS spectrum holdings. However, they described the effort as a "third layer" that would work in conjunction with their Wi-Fi network and Verizon's network.

Meaning, it would offload some traffic from Verizon's network, but their MVNO agreement with the operator would remain intact.

Better MVNO terms

This development comes just a few months after Verizon inked an "expanded and extended" MVNO agreement with Comcast and Charter. Verizon announced that new deal in the wake of AT&T's overt courting of cable MVNO deals.

And on Thursday, Comcast officials pointed to their new MVNO agreement with Verizon as part of the reason they expect to begin expanding their mobile sales. The Comcast executives didn't elaborate on how the company might alter its pricing and packaging options under the new MVNO deal, but the New Street analysts speculated it might allow the company to expand sales to business users.

Comcast CEO Brian Roberts described mobile as a "strategic part of the bundle."

Nonetheless, there is still a possibility that the cable companies could eventually shift their operations onto another network, like potentially a 5G offering from Dish Network. But that possibility seems tamped down in the wake of recent developments.

Overall, some financial analysts have argued that the cable industry's entry into wireless has been a success.

"Cable managed to gain share quickly, already edging toward 10% of industry gross adds," wrote the financial analysts at Sanford C. Bernstein & Co. in a note to investors last week. "As cable mobile subscribers only currently comprise a 2% of overall mobile subscribers, there is plenty of runway ahead as cable's mobile market share can approach its gross add share."

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

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