Analyst: WiMax Might Scratch Cable's Wireless Itch
The Wall Street Journal reported today that Comcast Corp. (Nasdaq: CMCSA, CMCSK), Time Warner Cable Inc. (NYSE: TWC), and Bright House Networks are in talks to invest as much as $1.6 billion into a national WiMax play operated by Sprint and Clearwire. Google (Nasdaq: GOOG) and Intel Corp. (Nasdaq: INTC) were also identified as possible contributors. (See Cable Rescues US WiMax?)
The paper said Sprint CEO Dan Hesse wants to seal the deal in time for next week's CTIA wireless trade show in Las Vegas. Comcast and Time Warner Cable officials declined to comment.
In a research note issued this morning, Sanford C. Bernstein & Co. Inc. analyst Craig Moffett said the deal would allow those cable operators to expand into wireless for "a modest capital commitment." In turn, it would enable Sprint to "reduce capital intensity" and still move ahead with its ambitious 4G Xohm offering. (See CES: Sprint's in the XOHM.)
Such a venture "would scratch a great many itches for everyone involved," Moffett wrote.
As for cable's possible involvement, Moffett points out that investors have grown concerned that MSOs might embark on a costly wireless strategy through an acquisition or a "go-it-alone" build out, a road that closely held Cox Communications Inc. might pursue after winning 22 licenses in the recently concluded 700 MHz spectrum auction. (See The Great Cable Spectrum Speculation.)
"Nevertheless, the [WiMax] deal would 'check the box' for wireless, and would do so with a far more modest capital commitment from the cable MSOs than the alternatives," Moffett explained. The alternative posited by the WSJ would have Comcast contributing $1 billion, Time Warner Cable putting in $500 million, and Bright House, the privately held MSO of the group, investing as much as $200 million.
"At the same time, however, investors have also fretted that not having wireless could be as bad or worse," he added, noting that a quad-play from the telcos could leave cable operators at a significant disadvantage.
The two largest U.S. MSOs have dropped hints recently about how they might fill that gap.
In December, Time Warner Cable president and CEO Glenn Britt said the MSO had "no intention of building the fifth cellular network," but suggested that the MSO would view partnerships and investments in 4G-related systems more favorably, but only "as an offensive move." (See Comcast, TWC Won't Bid in Wireless Auction .)
Top Comcast execs, meanwhile, have recently downplayed the role of wireless from an infrastructure standpoint in favor of a more access-agnostic wireless application and service strategy. (See Trading Places .)
Time Warner Cable, Comcast, and other members of the SpectrumCo LLC joint venture still have not addressed how they will exploit the Advanced Wireless Services (AWS) spectrum they obtained in 2006. (See SpectrumCo Gets Licenses .)
A WiMax agreement could re-energize Sprint's relationship with the cable industry. Last November, the joint venture opted to halt expansion of the "Pivot" service. (See Sprint Halts 'Pivot' Expansion.) A Time Warner Cable spokesman said there was no change in the status of Pivot, noting that the MSO "is continuing to service existing customers."
How the parties view the use of WiMax may differ among the parties involved. While Clearwire has indicated that its customers largely are broadband service replacement subs, "the cable operators have incentives to view WiMax as an add-on, primarily to add value to their existing customers," Moffett said.
— Jeff Baumgartner, Site Editor, Cable Digital News
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