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The New Glimmer Twins

A little less than two months ago, I wrote that another flurry of dealmaking could soon be underway between cable, media, and telecom companies.

That’s because in addition to a presumably more deal friendly Trump administration, the quiet period for participants in the government’s recent spectrum auction was about to end.

Federal wireless auctions are protracted affairs, which means negotiations between the major players had been effectively on hold for almost a year.

With the moratorium on such discussions now over, companies are starting to circle each other.

Originally, my prediction had been that Comcast Corp. (NSDQ: CMCSA) would seek to pair up with one of the top wireless companies, either T-Mobile US Inc. (NSDQ: TMUS) or Verizon Communications Inc. (NYSE: VZ).

Comcast has recently begun pushing into the wireless arena, and while it seems serious about this initiative, I figured it would be much easier for it to simply acquire a network rather than try to build one of its own.

But the cable behemoth continues to hedge against life without one of the Big Four. During the recent wireless auction, for instance, it bid $1.4 billion for licenses to use airwaves abandoned by TV stations. By contrast, Verizon remained on the sidelines.

Then, it entered the four-year wireless pricing war with an audacious offer of its own: unlimited data for just $45 per month starting in June. Granted that’s only available to existing customers who already pay for one of Comcast’s bundles, but at that price the would-be wireless usurper undercut all four of the incumbents.

Comcast’s wireless service will piggyback on Verizon’s network, courtesy of an earlier deal, and it will pay the telecom fees based on usage. But Comcast also plans to utilize its 16 million WiFi hotspots to provide broader coverage and faster connections, while reducing its dependence on Verizon’s network.

Prior to the end of the quiet period, there was speculation that Verizon might make a bid for cable giant Charter Communications Inc. (NSDQ: CHTR). Instead, it was Comcast that struck a deal with Charter.

Okay, it’s really more of a strategic partnership. And it may only last for a year. But it’s a consequential agreement nonetheless.

Last Monday, Comcast and Charter announced that they’re teaming up to accelerate the development of their respective wireless businesses.

Initially, Comcast had said it would roll out wireless to its strongest service territories. But with the partnership, its plans could get more ambitious much more quickly.

Like Comcast, Charter is also seeking to use its WiFi hotspots in tandem with Verizon’s network (again, courtesy of an earlier deal). However, it hadn’t expected to launch its wireless business until sometime next year. Now, it may be able to do so a lot sooner.

Equally important, the two companies also reportedly agreed not to make a significant merger or acquisition in the wireless space without the other’s consent.

Together, they could make a play for either Verizon or T-Mobile.

Or they could end up merging themselves.

But if they want T-Mobile, they better move quickly. On Friday, reports began to emerge that Sprint has begun to have preliminary conversations with T-Mobile about a potential merger.

Japanese billionaire Masayoshi Son, whose SoftBank Group controls Sprint Corp. (NYSE: S), had his empire-building efforts previously stymied by the Obama administration. But the Trump FCC has signaled that it’s more open to such mergers.

Regardless of the favorable climate for M&A, the Comcast/Charter agreement has likely put the kibosh on some of the more fanciful merger speculation of recent months. More important, it also puts them much more firmly in control of their own destinies.


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