Altice’s wireless offering will be cheap but profitable, expert says

Altice will only use Sprint’s radio access network. (Getty Images)

Altice USA is preparing to launch a wireless service offering in the United States this summer, making it the third cable operator in the U.S. to become a mobile virtual network operator (MVNO) that rides on an existing wireless service provider’s network. In Altice’s case the underlying network is Sprint.

But unlike its cable counterparts, Comcast and Charter, which are MVNOs powered by Verizon’s network, Altice is an infrastructure-based MVNO. That means it will only use Sprint’s radio access network (RAN). Altice will provide the SIM, voice messaging, customer care, and billing, and it will even negotiate roaming partnerships.

This distinction is important, according to Alex Besen, founder and CEO of the Besen Group, a consulting firm that specializes in MVNOs, because it means that Altice will be able to get better wholesale pricing from Sprint and will likely have a higher profit margin because it can leverage its own infrastructure instead of relying on Sprint.

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RELATED: Altice ‘on track’ to launch mobile services this summer; not worried about 5G FWA threat

Besen said that Comcast and Charter are using the reseller model for their MVNOs with Verizon, which means they have less control over the user experience and pay a higher price for using Verizon’s network.

Altice is planning to charge customers between $20 to $30 per month for wireless service, according to the Wall Street Journal, which cited unidentified sources close to the matter. That monthly price would be significantly lower than Comcast’s Xfinity Mobile service and Charter’s Spectrum Mobile service, which the companies offer to existing broadband customers for $45 per month.

Besen said that even at that low price of $20 to $30 per month, he believes Altice will make a decent profit. However, he said that the one negative for Altice is its limited territory. The company has a strong footprint in the Northeast from its acquisition of Cablevision and its network of Wi-Fi hotspots. This is also an area where Sprint has a strong footprint. However, in other regions of the U.S. there are coverage gaps, Besen said.

Altice’s ability to make money from its MVNO offering is important because Comcast and Charter have been criticized by MoffatNathanson analyst Craig Moffat who called the MVNO deal a “money loser” for the cable operators and said that they need to forge better MVNO agreements with Verizon.

Comcast and Charter’s current MVNO deal with Verizon was part of a $3.9 billion agreement negotiated in 2012 in which the two companies sold their AWS wireless spectrum to Verizon.

But analyst Mark Lowenstein, managing director of Mobile Ecosystem, said that although Comcast and Charter aren’t making money on their MVNOs, it also isn’t costing them much money to experiment with having a wireless offering. “They are dipping into the game at this point,” Lowenstein said. “They may be looking at this as a way to decide whether it has the potential to be a longer term play.”

What about 5G?

Lowenstein also said that unless the original deal that Comcast and Charter inked with Verizon included access to the company’s 5G network, the cable firms could be facing a decision soon about the future of their MVNOs. “Will they be stuck with 4G LTE?” Lowenstein asked, noting that distinction might be critical. “At some point if the cable companies are serious about being in the wireless industry they will have to make some type of investment in the network.”

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