Comcast and Charter, the top cable operators, are the winners after the end of T-Mobile-Sprint M/A talks, says MoffettNathanson analyst, Craig Moffett.
In addition, he said “A four player market is good news, on the margin, for Comcast and Charter, albeit less because of ‘deal opportunity’ for either one than because it creates a more hospitable dynamic for the wireless MVNO with Verizon,”
Moffett added, “relations between Cable and Verizon are likely to be stronger [without the T-Mobile/Sprint merger]”
Charter is planning to launch a wireless service in collaboration with Verizon in 2018. Moreover, in the third-quarter to MVNO-based wireless service, Comcast has added 250,000 customers, adding up to 18% of net customers for U.S. wireless industry. While the Big 4 U.S. mobile providers, ie, Verizon, AT&T, T-Mobile, and Sprint, managed net 1.4 million net customer addition in Q3.
Comcast has offered 2 plans for Xfinity Mobile, one is unlimited data plan at $45 a month per line (up to 5 lines) and another one is By the Gig option: shared cellular data at $12 per GB of all lines on an account each month. However, most of the customers are attracting to By the Gig option.
“Comcast appears to have landed on a potentially significant unmet market need, and as such, their offering could turn out to be rather disruptive,” Moffett said. He added, “Their pricing attacks an important profit pool for the carriers: light users who pay average prices for far-below-average usage.”
Further, he suggested, Comcast’s By the Gig plan is profitable for MSO and estimated that Comcast is paying not more than $8 per GB.
Moffet believes that T-Mobile and Verizon are best positioned to benefit. In addition, Moffet maintained Verizon’s a “buy” rating and raised the target to $51 from $50 and upgraded T-Mobile to “buy” by raising the price target to $73 from $69. Also, he maintained Sprint’s “sell” rating by cutting the price target from $6 to $2.
Currently, Moffett has maintained “sell” rating on Dish and target price of $37. The end of Sprint/T-Mobile Merger talks has created “marginally higher probability of a deal, but only marginally higher” for Dish.
He added, “In the more likely eventuality of network construction, Dish would be building into a five-player market.”