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Charter Eyeing MVNO Launch After Time Warner Buyout Closes

Charter Communications (NASDAQ: CHTR) this week officially closed its deal in acquiring Time Warner Cable and Bright House. The natural thought is on how this deal will affect the cable industry. However, there is another benefit that Charter considered in buying Time Warner and it is called an MVNO, and it could be just as profitable than the cable business.

Companies in the wireless space know that investors in their stock are curiously interested about MVNOs and how companies will maximize their use of it. Considering how crowded the wireless space is, anything that a company does to make their services more attractive will add to their bottom lines. That is why investors are looking at MVNOs, or at least they should be.


 · MVNO defined

An MVNO (Mobile Virtual Network Operator) is a mobile service that operates without its own licensed spectrum, and it may not have the infrastructure to provide mobile service to its customers, according to Webopedia. So basically MVNOs do not own the network on which they provide voice and data traffic. MVNOs lease wireless capacity from pre-existing mobile service providers and establish their own brand names that are different from the providers.

Think Virgin Mobile, which uses Sprint (NASDAQ: S) as its underlying carrier. Virgin Mobile is the MVNO.

Back in 2011, Verizon (NYSE: VZ) saw that there were players in the market that had a high-quality radio spectrum called AWS-1, which is used for data, voice, video and messaging. Those companies included Bright House Networks, Comcast (NASDAQ: CMCSA), Cox and Time Warner. The companies teamed up and Verizon entered into an agreement to purchase their spectrum.

It is clear that Charter, and any other player in the wireless space that’s worth their salt, understands the value of spectrum. According to FierceWireless, Charter’s CEO Tom Rutledge said at a conference this week that his company can now potentially offer a nationwide wireless service because its Time Warner acquisition gives it access to the same Verizon MVNO agreement as Comcast.

 · Comcast working on MVNO


Now that we’ve gotten all of the technical stuff out of the way when it comes and spectrum’s importance, let’s take a closer look at how getting it can help these companies take more market share in one of the most competitive industries around.
All eyes are on Comcast right now as it is expected to introduce its own mobile service, perhaps by the end of the year.

In some circles, Comcast is the industry darling in terms of launching an MVNO service right now because it can largely fulfill the main thing that investors want – capital efficiency. It is estimated to have more than 13 million WiFi hotspots. Other contenders may have considerable costs to incur in developing that many WiFi hotspots to compete with Comcast.


 · And then there’s Charter

One of the things I found interesting about Charter’s $66 billion acquisition of Time Warner and Bright House is how it positioned it to be able to make its move into the wireless market…right alongside Comcast. While the company has not outright said it will enter the space, documents from the Federal Communications Commission about the acquisition, which were released May 10, tell another story:

“The applicants contend that the transaction would enable New Charter to be a new entrant in the mobile wireless market by offering mobile products through increased WiFi deployment, the deployment of licensed spectrum or a mobile virtual network operator (MVNO) arrangement – and likely through some combination of these.”

As an investor, I would definitely keep an eye on Charter as another player in this growing, and potentially area of wireless offerings. If it does enter the arena, it could effectively compete with Comcast. This is especially the case since the acquisition gives it a considerable number of Wi-Fi hotspots.

At the meeting that I noted above that FierceWireless covered, Rutledge said this.
“In my view, we’re already a wireless company,” adding that a good amount of data is already transmitted wirelessly by customers to Charter’s network.

 · Others to watch


The market had anticipated last year that Apple (NASDAQ: AAPL) would launch its own MVNO, but it denied it then and seems to still have no intentions of launching one. Google (NASDAQ: GOOGL) has launched an MVNO service. It leases network capacity Sprint (NYSE: S) and T-Mobile (NASDAQ: TMUS).

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