It looks like the most talked-about deal in telecom is on hold for most of the summer, thanks to two of the cable industry’s most experienced deal makers. John Malone and Brian Roberts have reportedly backed an exclusive deal with Sprint which prevents the carrier from talking to any other potential partners until late July. Malone’s Liberty Broadband is the largest shareholder in Charter Communications and Roberts is CEO of Comcast. Comcast and Charter, the nation’s two largest cable operators, apparently want the right of first refusal when it comes to buying the wireless carrier that is number four in terms of subscribers and number one in terms of spectrum assets.
Comcast and Charter are said to be more likely to sign a reseller agreement with Sprint than to actually try to buy the company. Right now both cable companies have the right to resell wireless service using Verizon’s spectrum, and Comcast has already launched wireless service under this arrangement. But the cable companies might be able to get better terms from Sprint, and they might be able to get more access to the high-band spectrum that will be key to offering 5G wireless services.
Sprint has been slow to capitalize on its vast spectrum portfolio because much of its cash flow goes to service its net debt, which has ballooned to $32.6 billion. (Net operating revenue for the year ended in March was $33.3 billion.) Japanese carrier SoftBank, which owns a majority interest in Sprint, has pumped cash into the company, and now the cable industry may be willing to do the same thing.
Such a deal would make sense for Sprint, which has already developed technology that will leverage its unique spectrum position. Sprint needs capital to help it deploy infrastructure, and the cable companies need new ways to reach the so-called “cord cutters” who are discontinuing cable service in favor of wired and wireless internet service.
Comcast and Charter are expected to move forward together in their dealings with Sprint, because the two companies have already signed an agreement stating that neither will do a deal with a wireless carrier without the other’s blessing and/or participation. According to the Wall Street Journal, Malone wants the two cable giants to buy a carrier, but Roberts is hesitant.
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