Cable & Telecom Players Join Hands

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In order to promote each others products and reduce competition, Comcast Corp. (CMCSA) and Time Warner Cable Inc. (TWC) expanded their relationship with Verizon Wireless to provide triple play services (voice, video and Internet) and LTE-based smartphones and tablets to customers across Arkansas, Georgia, Indiana, Kentucky, Louisiana, Michigan, Mississippi, South Carolina and Tennessee. Moreover, new customers from Time Warner Cable and Comcast will also be provided with a $200 and $300 Visa prepaid debit card, respectively.

The partnership has evolved on the back of an agreement between the cable companies last year to sell Advanced Wireless Spectrum (:AWS) worth $2.3 billion and $1.1billion, respectively, to Verizon Wireless. Additionally, it will give them the flexibility to sell bundled services to their customers from their respective stores. However, the sale of AWS spectrum has not been approved by Federal Communications Commission (:FCC).

In order to gain market traction in the cable and satellite market, large telecom carriers have started offering video services to their subscribers through fiber optic cable networks. As a result, large cable TV service providers are seeing an exodus of subscribers, which is eating into their market shares.

So we believe that collaborative agreements between cable and telecom companies, such as this one may help to alleviate this competition. Customers should also gain from the increased flexibility of being able to choose different service plans.

Currently, both Comcast Corp. and Time Warner Cable have a Zacks #3 Rank, implying a short-term Hold rating on the stocks.

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