Now that both Comcast and Charter Communications have reported their fourth-quarter 2020 earnings, financial analysts are taking note of signs that they probably were not big spenders in the C-band auction.
The companies signed up to participate in the auction as joint bidders, under the name “C&C Wireless Holding Company.” The cable companies’ interest in the C-band auction wasn’t surprising; both had been engaged in FCC processes for years leading up to the auction.
But with the auction ending earlier this month and blockbuster gross proceeds topping $80.9 billion – about double what some analysts had predicted it would bring – speculation immediately focused on who or what was driving up the prices. Some analysts suspect Verizon could have bid $40 billion or more, but it wasn’t clear what the cable companies were up to.
Analysts point to Charter’s share repurchases in the fourth quarter and Comcast’s plans for a share repurchase in the second half of 2021 as indicative that they probably didn’t spend over-the-top amounts in the C-band auction.
Comcast management “announced intentions to begin repurchasing shares in 2H21, an announcement sooner than expected, signaling a vote of confidence on FCF durability (despite still-COVID headwinds, backed by Cable strength) and in our view signaling a manageable spend at the C-Band auction,” wrote Cowen analysts.
In their earnings calls, Comcast and Verizon both commented on changes to their existing MVNO agreement, to which Charter is a party, and that should help lower variable costs and boost gross margins, though neither provided any specificity, noted Craig Moffett of MoffettNathanson in a Friday report for investors.
“There has been some concern that Charter (and Comcast) will turn out to have been significant buyers of C-Band spectrum. We’ve always been doubtful that that would be the case, but Charter’s share repurchases in Q4, and Comcast’s repeated mentions of their 'asset light' strategy, should probably now put those concerns to rest,” Moffett wrote. “Their CBRS spectrum, however, provides a clear path for traffic offload. To the extent that they can offload a meaningful amount of traffic from their MVNO agreement, they will be able to reduce their variable costs more dramatically.”
Analysts at New Street Research said Comcast has lagged Charter’s growth in wireless in recent quarters. (Charter added 315,000 mobile lines in the fourth quarter whereas Comcast added 246,000 in the same period.) However, Comcast management was clear on the earnings call Thursday that they plan to accelerate wireless growth in 2021.
“They are content with their asset-light, MVNO strategy in wireless and it was clear that they did not spend heavily on spectrum in the C-Band auction,” the New Street analysts said. “Mgmt. also said they had expanded their MVNO agreement with Verizon, and plan to offload more traffic off of Verizon’s network onto their own, which should improve the margin profile of Wireless in the coming years.”
The clock phase of the C-band auction closed on January 15. The assignment phase, which starts February 8, will see bidders get the opportunity to bid for their preferred combinations of frequency-specific license assignments. New Street estimates the assignment phase could end around February 25, with a public notice announcing results coming around March 3, when the winners and their prizes will be revealed.