Can Comcast Corporation (CMCSA) Succeed At Offering Cell Service?


Comcast Corporation (NASDAQ:CMCSA) notified Verizon Communications Inc. (NYSE:VZ) about its intention of reselling its wireless service for which an agreement was struck earlier. In 2011, the Telecom firm struck a deal with most of the cable service providers, that was also approved by the regulator in 2012. Now, the company is reactivating the deal to enter the wireless service segment. Given the competition that is going on among the top four companies, the moot question is whether the company can succeed in the highly competitive segment. While it may be premature to come to a conclusion, the fact is that no one can take the cable firm’s entry into Cell service lightly.

Confirmation Came From Verizon CFO

Though Verizon Communications Inc. (NYSE:VZ) CFO, Fran Shammo, confirmed that the company was notified by a cable firm, he did not name the company, i.e. Comcast Corporation (NASDAQ:CMCSA). The key question is whether the agreement will be revised since it was drafted before data was the focal point of any mobile phone service compared to the voice or texts. Shammo was categorical that he would not discuss anything about items and conditions of the agreement or revising them. He cited a non-disclosure agreement for remaining evasive. However, he said that the industry is moving. Therefore, cable will do what it is supposed to, and the telecom will do what it is destined to do.

Comcast Corporation (NASDAQ:CMCSA) also refused to confirm or deny the reports of its entry into wireless services. Verizon Communications Inc. (NYSE:VZ) also refrained from commenting beyond what its CFO disclosed. Interestingly, Shammo commented that Wi-Fi was not an alternate route for high-speed cellular networks. He was obviously referring to the number of Wi-Fi hotspots that the cable firm has under its management. Similarly, the company has an alliance with other cable service providers to use each others network of Wi-Fi hotspots. An analyst with New Street Research, Jonathan Chaplin, indicated that the entry of Comcast is a near certainty. Everything points towards the entry of the cable firm into wireless services.

Pressure To Scout For Avenues For Revenue

Comcast Corporation (NASDAQ:CMCSA) is compelled to look alternate avenues for revenue generation after it was prevented from acquiring Time Warner Cable Inc (NYSE:TWC). The cable industry is facing pressures of cancellation or losing subscribers. It has been witnessing the impact of the cord-cutting. Therefore, the only other alternative is to enter the data services for cellular phones at an attractive rate, which would not involve any need to reach agreements for content.

There is a feeling that the cable company would do well in the wireless service sector due to its network, which was not used for competing. According to a report published in 2013 by MIT Technology Review, the cable distribution companies like Comcast Corporation (NASDAQ:CMCSA) are already making a 97% margin on their internet services. However, wireless service is highly competitive in the Americas mainly because of T-Mobile US Inc (NYSE:TMUS) CEO, John Legere. The company has virtually effected significant changes in bringing down the service costs to break the two-year contract period.

Combining Its Offerings

One of the possible reasons for the entry of Comcast into the wireless segment is to offer quadruple play to its existing cable customers. It would be a much similar way like the offering of phone service. After the FCC gave its approval for the agreement with Verizon Communications Inc. (NYSE:VZ), Comcast Corporation (NASDAQ:CMCSA) tried to offer a bundle of services in 2012. However, that failed to make the expected impact. The company is unlikely to get dirty in wireless now. Currently, there is only one choice for 30% of the American customers for fast home broadband; Comcast should not have any problem.

There is also a feeling gaining ground that if only Comcast succeeds in its efforts, then it might eye T-Mobile US Inc (NYSE:TMUS) for acquisition. In any case, whether Comcast succeeds or not, its intention appears to be to make use of the available network to earn extra dollars rather than remain silent about it.

Viraj Shah

Viraj Shah has completed M.Com (Finance) and is currently pursuing his CFP. He tracks US markets along with other global markets like India very closely. He is very passionate about stocks, real estate, and technology. He also believes that money can always be made in the market.

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