Cable Giants Explore Sprint Deal

Talks are not deals, but at least for two months, Sprint, Charter Communications and Comcast reportedly will explore possible deals, ranging likely from investments in Sprint by Charter and Comcast or even acquisitions or mergers, though most believe that is less likely.

One possible deal would involve an investment in Sprint by Charter and Comcast, which also would include favorable discounts on wholesale capacity provided by Sprint to Charter and Comcast, both of which are launching their own branded mobile services, using a mobile virtual network operrator deal with Verizon.

We can assume the cable companies are not happy about the business case, using Verizon's deal.

Any such deal would undoubtedly be structured in a way that does not prevent later talks between Sprint and T-Mobile US about a merger of those two firms.

A wholesale capacity arrangement with Sprint would allow the cable companies to lower operating costs, compared to the deal they have with Verizon, it is believed. Such a deal also would make possible the sort of “Wi-Fi first” service offered by Google Fi and Republic Wireless, which connect to a mobile network only when adequate Wi-Fi is not available.

Though the firms might deny the possibility now, sooner or later, Charter and Comcast will want “owner’s economics” for their mobile services. That does not necessarily entail buying Sprint or T-Mobile US outright.

In principle, other sources of spectrum are available, and in principle, the cable companies could contract with other parties to build and possibly operate such a network, at least for a time. Dish Network has spectrum that could be acquired, or Sprint could sell some spectrum to the cable companies. Eventually, both also could use unlicensed, shared or new millimeter wave spectrum becoming available in the U.S. market.

None of that seems especially likely in the near term, though. For the moment, the cable firms need coverage, above all, without the added expense of network operations costs.

In one sense, the possible moves indicate the new perceived value of mobility for video entertainment delivery, which in its linear form mostly has been delivered by fixed networks (either terrestrial or by satellite means). But in an over the top and on-demand environment, more content is being consumed using mobile devices.

That obviously has big implications for legacy linear video providers.

Also, bundles have been important value-boosting and retention-enhancing tools for some time. So adding mobility increases the value of cable bundles.

Though a full bid to merge Sprint with the two cable companies seems unlikely, for the moment, such a move would likely have a far easier time to gaining anti-trust approval, as it would not reduce the number of leading mobile providers in the market, as would a Sprint merger with T-Mobile US.