As telco giants AT&T (T) and Verizon (VZ) move deeper into the TV business, cable giants like Comcast (CMCSA) may have to get into the wireless business to compete. That could eventually involve Comcast buying Sprint Nextel (S), the no. 3 U.S. wireless carrier.
So far, Comcast and its peers have partnered with (and invested in) Clearwire (CLWR), an upstart carrier building out a 4G wireless network using a technology called WiMax. But there’s no guarantee WiMax or Clearwire will work. So then what?
It would probably be easier for Comcast to buy its way into the wireless industry than build its way there: Spectrum is scarce, building a wireless network is hard and takes time, lots of capex, etc.
So who would Comcast buy? Well, it can’t buy AT&T or Verizon Wireless. It’s possible that Deutsche Telekom (DT) might part with T-Mobile, but that’s not guaranteed.
So the most logical deal could be for Sprint, which currently has a $12 billion market cap and is slowly turning the corner after several bad years. This potential tie-up has been talked about for years, so it’s not a new idea. But it could make sense in the next few years, especially if Clearwire isn’t a hit.
Cable executives have played down the need to have wireless networks for years. But, via Pali Research analyst Rich Greenfield (registration required), it sure sounds like they’re starting to talk about wireless more seriously. From Comcast CEO Brian Roberts’ speech at the cable show in D.C. yesterday:
- “Wireless is a conundrum for the cable industry”
- “AT&T and Verizon are not the elephants in the room, they’re the super elephants, They’ve got all the market share, and it’s going to be a tough road to hoe”
- “Putting a bunch of us in a company with the benefit of Sprint and their infrastructure felt like an interesting road for us to go into”
- Roberts also avoided a clear answer to the question as to whether Clearwire was Comcast’s sole wireless strategy, indicating that Comcast’s “current” focus was making Clearwire successful.
Greenfield’s point: If cable companies do have to build or buy their way into wireless, it’s not going to be cheap. And he thinks that kind of capex (or acquisition spend) is “substantially understated” in Wall Street’s models.