Analysts: Charter's Time Warner Cable deal could signal shift into wireless

Charter Communications' (NASDAQ: CHTR) $56.7 billion bid to buy Time Warner Cable (NYSE: TWC) is about more than just the pay-TV and home broadband market--it could also lead to a more assertive push into the wireless realm by the two companies and other cable players, according to financial and industry analysts.

In conjunction with the TWC deal, Charter also announced that it will move forward with its earlier announced $10.4 billion agreement to purchase Bright House Networks. The combined "New Charter" will have 23.9 million customers in 41 states, becoming the second biggest cable company next to Comcast (NASDAQ: CMCSA). That scale could give Charter greater heft in a Wi-Fi expansion or a partnership with a wireless carrier.

Charter CEO Tom Rutledge told Bloomberg that following the deal's approval one of Charter's next moves would be to expand its Wi-Fi footprint in homes and public spaces. Further, on a conference call yesterday with investors, Rutledge said that wireless will allow the company to add customers who only own mobile phones--and who have an existing relationship with a wireless carrier. "I think that's a long-term opportunity of the industry and one that's enhanced by this combination," he said.

Cablevision (NYSE: CVC) has been on the forefront of the cable industry's push into wireless. The company earlier this year launched its $10-per-month Freewheel Wi-Fi voice calling and data service. The service is Wi-Fi-only and does not have a cellular fallback.

As Fortune notes, Charter doesn't have a large Wi-Fi hotspot network currently, but TWC and Bright House do. Both cable companies are members of the CableWiFi consortium, which pools together around 400,000 indoor and outdoor hotspots around the country built by five of the nation's largest cable companies. It's unclear if Charter will join the consortium.

Industry analyst Chetan Sharma said Charter will likely look to add mobile voice and data components to its portfolio of products, though he said doing so carries great risk.

"All of the cable operators are exploring a Wi-Fi-first mobile strategy, but the problem is achieving scale," Sharma said. "Without scale there's no point."

Interestingly, just days before Charter's deal for TWC was announced, Charter filed comments with the FCC voicing its support for next year's planned incentive auction of 600 MHz broadcast TV spectrum, an unusual move for a cable company. "I don't think it's a coincidence that it occurred within days of Charter announcing its planned acquisition," BTIG analyst Walter Piecyk told FierceWireless

"Charter has a keen interest in the evolving mobile broadband market and recognizes that the auction has the potential to inject much needed competition into the wireless marketplace," the MSO wrote.

Notably, Charter agreed with many of the incentive auction policy prescriptions espoused by T-Mobile and Sprint, including increasing the amount of the spectrum set aside for smaller carriers to bid on from 30 MHz to 40 MHz.

"The number of possible buyers and/or partners for wireless has clearly increased," Piecyk said. "The underlying issue is LTE and what's it's enabled" in terms of over-the-top mobile video. Piecyk said Charter and other cable operators are not interested in mobile voice but in how they can make money on mobile data.

For more:
- see this Bloomberg article
- see this Fortune article
- see this BTUG blog post (reg. req.)

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