Cable companies sell wireless licenses to Verizon
Cable companies Comcast, Time Warner Cable and Bright House Networks are giving up on their dreams of creating their own wireless network...
The Associated Press
NEW YORK — Cable companies Comcast, Time Warner Cable and Bright House Networks are giving up on their dreams of creating their own wireless network, opting instead to resell Verizon Wireless service.
The companies said Friday that they have agreed to sell their wireless licenses — which they haven't been using — to Verizon Wireless for $3.6 billion.
The deal "amounts to a partnership between formerly mortal enemies," said analyst Craig Moffett at Sanford Bernstein. The cable companies compete with Verizon Communications, Verizon Wireless' parent company, for phone and cable-TV customers. Now, Verizon Wireless stores will be selling cable service.
Cable companies have long had ambitions to open a second front against AT&T and Verizon by setting up their own wireless networks. In the meantime, some of them have partnered with Sprint Nextel and Clearwire to offer wireless service.
Lately, there had been speculation that the cable companies would try for a deeper beachhead in wireless by investing in ailing No. 3 and 4 carriers Sprint or T-Mobile USA. That talk had gained currency as it's become clear that AT&T's deal to buy T-Mobile USA is opposed by regulators.
The linkup with No. 1 carrier Verizon Wireless and the sale of the spectrum appears to preclude a deal between a cable consortium and one of the weaker players in wireless. Instead, the biggest cellphone company will strengthen its hand, if the spectrum sale is approved by regulators.
"Pity poor T-Mobile. Verizon just ran off with the last pretty girl in the bar," Moffett said.
U.S.-listed shares of Deutsche Telekom, the parent of T-Mobile USA, were down 53 cents, or 4.2 percent, at $12.25 in midday trading. Sprint shares were down 3 cents, or 1.1 percent, at $2.67.
"It's really hard for a cable company to expect to compete in a highly competitive wireless market," said Time Warner Cable spokesman Alex Dudley. He pointed to Cox Communications, another cable company, which this year shut down its plans to build out a wireless network.
"We got a good price for the spectrum," Dudley said. "An arrangement like this makes a lot of sense."
The cable companies paid $2.2 billion for the spectrum in 2006, so they're getting a 64 percent gain on a five-year investment. The spectrum covers about 85 percent of the country's population, and would have been sufficient to start up an independent wireless network.
Neil Smit, the head of Comcast's cable operations, said its Clearwire service, marketed as "Xfinity 2Go," will be shut down within six months. It has about 30,000 customers.
Clearwire shares were unchanged at $2.03.
Moffett, the analyst, said the Federal Communications Commission (FCC) would probably rather see the spectrum go to T-Mobile USA. One of the reasons its German parent company wants to sell it to AT&T is that T-Mobile USA doesn't have a lot of room on the airwaves, and can't keep up with Verizon and AT&T when it comes to expanding wireless data capacity.
But Deutsche Telekom is unwilling to plow more money into the U.S., so an outright purchase of the cable-company spectrum has not been in the cards.
The sale to Verizon does solve one problem for the FCC, Moffett said — that the cable spectrum holdings have not been put to use yet.
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