Cable companies to resell Verizon Wireless service

Question of the Day

Is it still considered bad form to talk politics during a social gathering?

View results

NEW YORK (AP) - Cable companies Comcast Corp., Time Warner Cable Inc. and Bright House Networks are giving up on their dreams of creating their own wireless network, opting instead to resell Verizon Wireless service.

The companies said Friday that they have agreed to sell their wireless licenses _ which they haven’t been using _ to Verizon Wireless for $3.6 billion.

The deal “amounts to a partnership between formerly mortal enemies,” said analyst Craig Moffett at Sanford Bernstein. The cable companies compete with Verizon Communications Inc., Verizon Wireless’ parent company, for phone and cable-TV customers. Now, Verizon Wireless stores will be selling cable service.

Cable companies have long had ambitions to open a second front against AT&T Inc. and Verizon by setting up their own wireless networks. In the meantime, some of them have partnered with Sprint Nextel Corp. and Clearwire Corp. to offer wireless service.

Lately, there had been speculation that the cable companies would try for a deeper beachhead in wireless by investing in ailing No. 3 and 4 carriers Sprint or T-Mobile USA. That talk had gained currency as it’s become clear that AT&T’s deal to buy T-Mobile USA is firmly opposed by regulators.

The link-up with No. 1 carrier Verizon Wireless and the sale of the spectrum appears to preclude a deal between a cable consortium and one of the weaker players in wireless. Instead, the biggest cellphone company will strengthen its hand, if the spectrum sale is approved by regulators.

“Pity poor T-Mobile. Verizon just ran off with the last pretty girl in the bar,” Moffett said.

U.S.-listed shares of Deutsche Telekom AG, the parent of T-Mobile USA, were down 53 cents, or 4.2 percent, at $12.25 in midday trading. Sprint shares were down 3 cents, or 1.1 percent, at $2.67.

“It’s really hard for a cable company to expect to compete in a highly competitive wireless market,” said Time Warner Cable spokesman Alex Dudley. He pointed to Cox Communications, another cable company, which this year shut down its plans to build out a wireless network.

“We got a good price for the spectrum,” Dudley said. “An arrangement like this makes a lot of sense.”

The cable companies paid $2.2 billion for the spectrum in 2006, so they’re getting a 64 percent gain on a five-year investment. The spectrum covers about 85 percent of the country’s population, and would have been sufficient to start up an independent wireless network.

Shares of Philadelphia-based Comcast rose 97 cents, or 4.3 percent, to $23.53. New York-based Time Warner Cable shares rose $1.90, or 3.1 percent, to $62.82. Orlando, Fla.-based Bright House Networks is privately held.

Time Warner Cable currently resells access to Clearwire’s wireless data network as “4G” service. Dudley said it could continue to provide service to existing subscribers, but the arrangement with Verizon Wireless is exclusive, so it will stop selling to new subscribers.

Neil Smit, the head of Comcast’s cable operations, said its Clearwire service, marketed as “Xfinity 2Go,” will be shut down within six months. It has about 30,000 customers.

Clearwire shares were unchanged at $2.03.

Story Continues →

View Entire Story

Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Comments
blog comments powered by Disqus
TWT Video Picks