Sprint executives have said previously the carrier will explore all possibilities for a deal, and it seems that’s exactly what they’re doing.
Though the market has been abuzz lately with talk of a potential Sprint hookup with fellow U.S. wireless carrier T-Mobile, the Wall Street Journal reported Monday Sprint is also in deal talks with cable companies Charter Communications and Comcast. The discussions were described as “exclusive” for a two-month period, which means alternative efforts with T-Mobile have been put on a temporary hold.
The news was also published by Reuters in its own report.
According to the WSJ report, the conversation is focused on coming to an agreement for the cable companies to offer wireless services on Sprint’s network. Both Charter and Comcast currently have MVNO deals with Sprint’s rival, Verizon, and the cable pair recently agreed to work together on wireless efforts. Another possibility is that the cable players could take an equity stake in Sprint, helping the wireless carrier with network investments, the WSJ article noted.
The news sent Sprint shares on the rise by 3.8 percent in pre-market trading Tuesday morning, while T-Mobile stocks took a nearly 4.5 percent dive.
BTIG analyst Walter Piecyk noted Tuesday that a cable play in wireless makes sense to help the former mitigate threats to its hold on the video and broadband segments.
“We believe the continued improvement in LTE’s capabilities through network densification and carrier aggregation poses a threat not only to the cable industry’s video business, but also to broadband,” Piecyk wrote. “More importantly, wireless data offers a huge incremental revenue opportunity for the cable industry that would leverage their existing fiber investments and re-position these companies to address the changing habits of their customers.”
But the deal could also offer benefits to Sprint, mainly by providing a fiber footprint to expand the carrier’s small cell deployments. An MVNO deal with cable operators could also boost Sprint’s economic position in separate deal talks with T-Mobile and parent company Deutsche Telekom, he added.
Wells Fargo Senior Analyst Jennifer Fritzsche noted Sprint has a history with the cable industry – the latter were original equity holders in Sprint PCS, she said.
But Piecyk indicated that doesn’t mean cable necessarily has to team up with a current carrier to play in wireless. The cost of wireless networks is largely tied to fiber deployments – and with their existing footprints, Charter and Comcast could just build their own if they really want to.
“In fact, Charter already provides backhaul to 25,000 cell sites. We believe cable operators in the United States are well positioned to leverage their fiber investments beyond simply providing backhaul to the wireless industry, but also by attaching wireless access points across those fiber miles for their own use,” Piecyk noted earlier this month. “We previously sized the cost to Comcast to overlay a wireless network on their footprint at less than $2 billion.”
