In a world full of mergers, acquisitions and industry changes, one of the next natural waves of M&A, or at least partnerships, would seem to be older cable television companies and the wireless industry. The only question is: Which TV providers, and which wireless carriers?
There are many players, large and small. On the cable television and pay TV space, there are larger companies like Comcast Corporation (CMCSA) , Time Warner Cable, Inc. (TWC) , Cox, Charter Communcications, Inc (CHTR) and DISH Network Corp (DISH) . There are also countless smaller providers from coast-to-coast as well.
On the wireless side, there are just four national carriers, AT&T, Inc. (T) Mobility, Verizon Communications, Inc. (VZ) , Sprint Corp. (S) and T-Mobile US (TMUS) . There are smaller wireless carriers as well, but they don’t have the footprint, speed or spectrum to be of value in this.
Wireless and Pay TV Merger
If the cable television industry would be interested in a wireless acquisition, there are a few possibilities. After the merger with Time Warner Cable and BrightHouse is complete, the two big industry players will be Comcast and Charter.
Comcast and Charter will be the largest competitors, and have the largest need for wireless. However they are not national providers, which complicates matters. Will they be able to successfully run a wireless company when they failed in the past?
So Comcast or Charter could be interested in acquiring a wireless carrier. Which carrier is the question? We have seen interest from T-Mobile over the last several years. They would be a good option, although they have limited wireless spectrum. This would not be as big a problem for Dish Network since they have spectrum, but other cable television companies may find a Dish hookup more difficult.
Sprint is another wireless carrier, which might be in the mix. They have spectrum, and an improving network experience for customers. So they could be interesting to cable television companies without spectrum. Will they be a player going forward?
Where Cable TV Will Get Wireless
The next question is: Will the cable television companies be interested in working together with the wireless industry as opposed to acquiring? I think this might be the quickest way to solve the cable television problem...especially since they don’t seem to be able to operate a wireless carrier on their own looking at their past performance.
Wireless and pay TV is going to continue to grow, but the recipe for growth is changing. Pay TV needs to be able to deliver programming wirelessly over smartphones and tablets to any place the customer happens to be.
Another important question is: What about all the other cable television providers, large and small, all over the USA? They all need a wireless arm as well to deliver television to smartphones and tablets anywhere in the country. Where will they get their wireless connection?
New Opportunity for Wireless Industry
That may be a new and huge growth opportunity for the entire wireless industry. Companies like AT&T Mobility, Verizon Wireless, Sprint and T-Mobile could all expand their business and offer a Pay TV chapter in their wireless story. However T-Mobile doesn’t seem to have enough spectrum at this time.
Today, the service provider with the biggest package of services is AT&T. With their DirecTV, U-verse, AT&T Mobility, GigaPower and other services, they seem to have the widest range of growth oriented services. I also expect they will continue to blend their existing services and continue to add more opportunities to the mix.
If they decide to jump in with a full package of cable television related services, both Verizon Wireless and Sprint can also be a winner going forward. So AT&T, Verizon and Sprint seem to be the best bets to partner with today.
Merger, Acquisition and Partnership
With all this said, we may be seeing the marketplace gearing up for quite a ride with M&A and partnership activity between the pay TV space and the wireless industry. That raises lots of interesting questions whether you are an investor, customer, worker or partner. The industry could be on the verge of going through another major transformation.
Which Companies Will Succeed?
As always, some companies will do well while others will fail. The only question is which is which. I would say AT&T, Verizon and Sprint stand the most to gain on the wireless side. If they offer a good quality and innovative wireless option for the pay TV industry, they could be a big winner if they offer good packages.
The biggest question mark comes from the cable television side. If they are forward thinking and successfully integrate a good wireless arm to their mix, then they can win big as well. However if they don’t they may crash and burn. I believe we’ll see companies on both sides of this fence.
Enter the Wireless Race or Die
Regardless, this is not a race the pay television industry can sit out. It may be as simple as entering enter the wireless race and winning, or die. If they don’t enter the race and don’t offer a wireless service, they will ultimately lose.
Equities.com columnist Jeff Kagan is a Wireless Analyst, Telecom Analyst, Industry Analyst and consultant. He shares thoughts on the changing industry, which he's been following for 25 years. He follows what's hot, what's not, why and what's coming next. Email him at jeff@jeffKAGAN.com.
DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer