It was reported this week Comcast and Charter are in discussions with Sprint regarding an expanded MVNO arrangement, or a possible equity stake/outright acquisition of the company. Wall Street has weighed in on the cost synergies of a deal, plus the possible stock impact on the various stakeholders. But what would this mean for the industry, and consumers?
The biggest beneficiaries of the deal would Sprint and the cable companies. For Sprint, this could be a win-win. A tie-up with cable would provide needed capital and, potentially, valuable infrastructure (pole sites, backhaul) for its small cell centric network buildout. For cable, this would allow them to go ‘all in’ on wireless in a way that the current deal with Verizon doesn’t. Plus, if the joint network assets are effectively combined, this could really position the two entities to offer the wireless/broadband ‘network of the future’, combining DOCSIS/fiber, wireless towers (macro cells), small cells, and Wi-Fi.
The impact on the industry and consumers would be mixed. One negative is that the current imbalance in the level of competition between broadband and wireless would be maintained. In the current U.S. broadband internet (BBI) market, some 50% of urban and suburban areas have only one ISP option for 25 Mbps or better internet. This deal would further cement that concentration. Alternatively, a Sprint/T-Mobile combination could offer, in part, a competitive broadband alternative in a 5G world, and could possibly push Verizon and Charter together, plus other cable/telco deals that might result in a 2-3 player near national BBI landscape.
It’s a mixed bag for wireless, too. I have argued that consolidation from four national wireless operators to three would be good for the industry and consumers, especially given the capital needed to keep up with capacity demand and build 5G. It is very difficult to envision four national 5G networks, given the number of small cells that would be required.
A Sprint-Cable tie up would lead to a cascade of deal activity. DISH becomes the power broker, as a potential spectrum supplier to Verizon and/or acquirer of T-Mobile. This might also hasten further consolidation in the cable industry. I would also not rule out one of the big Internet players doing something, possibly Google or Amazon.
What is the impact on consumers? Well, the wireless industry isn’t all that healthy right now. All the major operators except T-Mobile are pretty battered and bruised from the ‘unlimited’ price war. Sprint is committing increasingly irrational acts to win subscribers, while cutting costs and under-investing in its network. With continued data traffic growth and a wave of investment needed to build out newly acquired spectrum and ultimately 5G, the industry needs to be on a healthier financial footing. A combination of T-Mobile and Sprint would be better for the industry and consumers, long term, than today’s four player battle royal. Actual cable company skin in the game increases the likelihood of a viable four player market. And the other deals that a Cable-Sprint deal could trigger might usher in more competition in broadband.
We also need to take the longer-term view here. Historically, mobile and broadband internet have been on their own separate islands. Now, with small cells, Wi-Fi, 5G, and more abundant spectrum, this starts to become more of a giant Venn diagram. Testament to this is the number of fixed wireless access pilots, deployments, and trials planned for the next year or so by Verizon and AT&T. If successful, 5G could become a viable broadband alternative. Between the results of those deployments and the various industry M&A scenarios, we’ll know a lot more about the future shape of the cable-telco-wireless space by this time next year.