Cable giants reach a partnership as they seek a share of cutthroat business
Comcast Corp. and Charter Communications Inc. are striking a wireless partnership, people familiar with the matter said, as the cable giants look to get a piece of the cutthroat business.
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As part of the deal, Comcast and Charter have agreed not to make a material merger or acquisition in wireless without the other's consent for one year, one of the people said.
That agreement could stoke Wall Street speculation among investors and analysts that the two largest U.S. cable companies together could decide to make a play for a carrier like T-Mobile US Inc. or Sprint Corp. Neither company as a single entity could buy another wireless carrier for that time period as a result of that agreement without the other's blessing or involvement, the person said.
Wireless carriers are fighting it out in a fierce price war, while cable companies like Comcast and Charter are dealing with a saturated pay-TV business under assault from threats like cord-cutting and cheaper online video services.
The cable companies view wireless phone service as an opportunity to create a new product to make their bundles more appealing and better retain existing customers. They hope that by offering a "quad play" of cable TV, home internet, landline phone and wireless service, customers will be less likely to drop their service and jump to a rival.
Comcast recently released plans to offer a wireless service to its customers and purchased airwaves that could be used to help offer it in a government spectrum auction.
Charter has said it would offer wireless service as soon as next year. Both plan to rely on a five-year-old agreement with Verizon Communications Inc. that allows them to resell Verizon's airwaves to offer cellphone service to their cable customers. Comcast plans to start offering its mobile service to customers as soon as later this month.
The new operational partnership will allow Charter and Comcast to share technology and work together to use their combined scale in vendor negotiations with the likes of Samsung for handsets, for instance, one of the people said. However, the two companies will keep their customer-facing wireless storefronts and mobile plans separate.
The idea is that the partnership will allow the companies to share what they learn about what works and what doesn't in service plans and back-office billing operations, as well as achieve potential cost efficiencies. It could also help the two advance development on how to take advantage of their network of millions of Wi-Fi hotspots to bolster their wireless service. Today, handing off a voice call between a W-Fi hotspot and cellular remains clunky.
The companies also agreed that they would only work together with respect to other commercial arrangements with the national wireless carriers, such as in wireless airwave reseller deals like the one they already have with Verizon.
The cable companies will also likely explore working closer together to gain scale in wireless and digital advertising as a result of the partnership, another person familiar with the matter said. Rivals AT&T and Verizon have openly discussed their interest in making a bigger play there, as juggernauts Google Inc. and Facebook Inc. are sucking up the majority of digital ad dollars. Comcast and Charter already collaborate in local cable ad sales.
Comcast and Charter will each still only offer wireless service to customers within their respective cable footprints -- not nationwide, the person said. However, their mobile plans' coverage will be nationwide.
The deal is likely to be announced on Monday, people familiar with the matter said.
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(END) Dow Jones Newswires
May 08, 2017 02:47 ET (06:47 GMT)