Charter Communications said that its mobile virtual network operator (MVNO) service reached a total of 1.1 million mobile lines as of December 31, 2019. Charter added 288,000 Spectrum Mobile lines in the fourth quarter, with 948,000 mobile lines added in the full year 2019.
The company launched its Spectrum Mobile service in July 2018, and has been adding subscribers at a steady clip. In the third quarter 2019 it added 276,000 mobile lines, up from 208,000 additions in the second quarter 2019.
In its fourth quarter, the company's revenue of $11.8 billion grew by 4.7% year-over-year, primarily driven by residential revenue growth of 5.7% and small- medium-business revenue growth of 6.3%. Charter said its Q4 mobile revenue grew $147 million.
Charter reinvested all of its mobile revenue for the quarter, saying it spent $151 million on mobile-related capital expenditures during the fourth quarter. For the full year 2019, capital expenditures totaled $7.2 billion, down from $9.1 billion in 2018, and included $432 million of mobile-related CAPEX.
The Spectrum Mobile service rides on Verizon’s nationwide wireless network. It’s available to all new and existing Spectrum Internet customers who can choose an unlimited data plan for $45 a month per line, or by-the-gig at $14/GB.
Charter and its cable competitor Comcast are both piling up subs. Comcast added 261,000 wireless subscribers in the fourth quarter, its largest gain yet in a single quarter, and putting it past the 2 million subscriber mark in total wireless customers.
“Charter’s haul of 288K wireless subscribers in Q4, along with Comcast’s record gain reported last week, leaves the cable industry with more than 3 million wireless subscribers,” writes MoffettNathanson analyst Craig Moffett. “At an estimated $25-or-so of wholesale revenue per subscriber per month, the cable industry already annualizes to almost $1 billion of high-margin revenue for their MVNO partner.”
Charter executives have spoken about their interest in CBRS spectrum. They could build out some wireless infrastructure themselves and use the CBRS spectrum to run it. Chris Winfrey, Charter’s CFO, said on last week’s earnings call that the company will “likely participate” in the upcoming CBRS auction in June.
Charter CEO Tom Rutledge said, “On the wireless situation it's really a math question of what's a cost to pay for your MVNO rate and what's the cost to build? There's no immediate plan to change our fundamental relationship with our carriers. But over time as the market evolves and speeds go up, and capacity goes up, the economics may change, and we'll take advantage of those through time as the marketplace unfolds.”
Moffett said the “dirty little secret” is that by some estimates 10% of cell sites account for as much as 70% of traffic. “By building out facilities in only the densest areas, cable can offload a tremendous amount of traffic from the MVNO contract, dramatically lowering their variable costs with only minimal investment," writes Moffett. "That will then allow for either higher margins or, more likely, lower prices… and therefore even faster growth.”
Speaking at a FierceWireless event in November, Charter SVP of wireless technology Craig Cowden said the company is considering using home-based Wi-Fi, that operates similarly to Comcast’s Xfinity Wi-Fi product, to help offload more traffic for its Spectrum Mobile service. Cowden said Charter already uses public Wi-Fi hotspots to help offload traffic from Verizon’s network. Charter has about the same number of these outdoor hotspots as Comcast.
But Comcast boosts its Xfinity Mobile MVNO offering with millions more of its in-home Xfinity Wi-Fi hotspots. “We already offload significant traffic onto Wi-Fi,” said Cowden. “Comcast has 19 million hotspots that are called home-as-a-hotspot, using the existing router in the home. We see a benefit of doing that.”