Cable’s Mobile Connections Only On the Warming Platter

Sharon Armbrust | October 25, 2006, 06:37 PM

The MSOs’ current joint venture and reciprocal resale agreement with Sprint Nextel is a good field lab. Cablecos are getting a handle on all the back office and technology and service integration issues they will need to address, then get built and running smoothly before any fully integrated mobile component is ready for prime time in the cable industry service bundle. But what next?

The WJS today (10/25) reported on persistent rumors that Comcast might be eyeing Sprint Nextel or Yahoo as an acquisition target, given its 52 week high stock price and the other companies’ down market trading levels. Comcast recently $39, up 42% LTM, while Yahoo is down 31% to about $24 and Sprint Nextel down 25% to under $18.
Comcast has been firm in roundly quashing that talk. Comcast surely doesn’t need to be in any hurry to leverage up for Sprint Nextel should it develop an interest. Timing and tactics are on its side.

a. Now that it has its own wireless spectrum from the AWS auction, its bargaining position for a re-written jv with Sprint is much stronger, should the MSOs want to go that route.

b. Sprint Nextel is struggling mightily with a poorly executed Nextel integration (see earlier blog) and would be a big headache to take over. And while it fixes its network problems, its stock is likely to get hit some more.

c. Competitors AT&T and Verizon haven’t made much of their wireless capabilities in any bundle marketing yet, although it is on their radar to do so. But first up are AT&Ts BellSouth merger and Cingular roll-up, Verizon’s $18 bil. spend on its IPTV net.

Comcast has always been measured in its pace of rolling out new technologies. It was a year behind its peer group in getting to its cable telephony offering. But after less than a year in the market it has 10% penetration of its marketed homes, and cable telco penetration in aggregate will ramp to over 20% by 2011 and over 25% by 2016, according to our latest Kagan forecasts. It’s unlikely Comcast’s mobile moves will be any less thoughtfully deliberately executed than its telephony and previously its broadband tier were. That makes the Sprint/Cable jv a perfect starter course for whetting the appetite.