The new partnership between cable giants Comcast and Charter Communications signals the importance of wireless technology to the future of the telecom industry, according to T-Mobile CFO Braxton Carter. Moreover, the operators’ partnership could potentially set the stage for a company to “truly disrupt what is happening in the U.S. marketplace.”
“You can definitely dip your toe in the water with an MVNO, but you’re never really going to have true owner’s economics,” Carter said today in comments at a JP Morgan conference for Wall Street investors. “And more importantly you’re never going to have deep integration of the cable and wireless networks—and that is a major unlock of value. And I believe that that type of coalition [between Comcast and Charter] actually makes, eventually, more industrial sense for cable and wireless to come together to truly disrupt what is happening in the U.S. marketplace.”
Comcast and Charter announced earlier this month that they will join forces as they take on the four major carriers in an extremely competitive U.S. wireless market. “By working with the team at Comcast, we can not only speed Charter’s entry into the marketplace, it will also enable us to provide more competition and drive costs down for consumers at a similar national scale as current wireless operators,” Charter CEO Tom Rutledge explained in a press release announcing the news. “We look forward to working with Comcast through this innovative arrangement and bringing our focus on superior products and services, craftsmanship and quality customer care to the wireless space.”
Thus, Carter’s comments today on Comcast and Charter’s wireless partnership are noteworthy considering some analysts have speculated that the two cable companies could consider some kind of three-way transaction involving T-Mobile.
Carter added that Comcast’s recent entry into the wireless market, via its Xfinity Mobile MVNO offering, further signals the growth potential in the wireless market. “These are major corporations getting into the business so there certainly are new entrants and new competitors that are a reality today. And that wasn’t the case a couple of years ago,” he said. “I actually think the Comcast/Charter potential announcement of collaborating on many, many different areas is a sign of significant interest in the wireless space as those businesses evolve.”
“I think it’s really silly to think this only is a four-player market,” he added, speaking of the nation’s wireless sector.
In his comments, Carter also reiterated T-Mobile’s interest in a potential merger with Sprint. “One of the benefits of a Sprint transaction would be a combination and rationalization of two networks in one,” he said of combining T-Mobile’s network with Sprint’s network, including Sprint’s copious 2.5 GHz spectrum holdings. “You combine the two networks to have tremendous density. And then put the 2.5 [GHz], and what that could do to you for 5G is massive future capex avoidance as this develops, and significant differentiation against the competition. You look at the potential convergence of cable, broadband and wireless: Potential massive opportunities on the 5G side. And we’re a company that I think is uniquely positioned to evaluate these types of opportunities as they develop in the future.”
He added that a combination of Sprint and T-Mobile isn’t “rocket science,” and he said that T-Mobile would continue to evaluate that merger as well as any other major transactions in the interest of “super charging our value creation in the marketplace.”
Carter’s comments on Sprint don’t come as much of a surprise. Just last week he said that T-Mobile would hold talks with the company for a possible transaction. “It’s not a question of will talks happen; of course they’ll happen,” Carter said last week. “There’s a huge prize when you talk about Sprint, and that’s true, hard synergies.”
To be clear, though, T-Mobile’s Carter reaffirmed that the company continues to see growth options beyond mergers and acquisitions. “We have a great standalone path to value creation,” he said, pointing out the carrier will build out its 700 MHz and 600 MHz spectrum to new locations in the United States, giving it a larger addressable market. He also added that T-Mobile continues to see opportunities in the enterprise market; indeed, he said the operator recorded a 200% increase in “enterprise flow” in the first quarter of this year compared with the same quarter in the prior year.