Charter Communications Inc. CHTR recently announced that the company will foray into the wireless market in 2018. Notably, the company has an agreement with U.S. telecom behemoth Verizon Communications Inc. VZ to operate as an MVNO (mobile virtual network operator) using the latter’s wireless network. The company will utilize Verizon’s wireless network together with its WiFi network to offer mobile services.
In February 2017, Charter Communications announced that it will be launching experimental field trials of the upcoming 5G wireless network. These trials come on the back of spectrum test licenses granted to the company by the Federal Communications Commission (FCC). The company is actively testing licensed small-cell technologies and has petitioned the FCC to release 3.5 GHz spectrum, popularly known as the CBRS band, for both licensed and unlicensed use.
Charter Communications has decided to combine 4G LTE and upcoming 5G technologies with its existing high-speed broadband network to profoundly enhance connectivity for subscribers. With the acquisitions of Time Warner Cable and Bright House Networks last year, the company has become the second largest cable MSO (multi service operator) in the United States.
On May 8, 2017, Charter Communications and Comcast Corp. CMCSA, the largest cable MSO in the United States, agreed to jointly work on their wireless services businesses. They aim to better explore their opportunities, and accelerate and enhance each other’s ability to participate in the national wireless marketplace. Importantly, Comcast has already entered the wireless market using MVNO agreement with Verizon and its own WiFi network.
While unveiling its unlimited data plan for the wireless market, Comcast stated that its plan is not specifically related to making huge profits or gaining significant market share from incumbent carriers. Instead, it will aim at retaining existing X1 pay-TV bundle subscribers by reducing churn rate. We believe the same logic also holds good for Charter Communications since cord-cutting has become an existential threat for traditional pay-TV operators.
Verizon is already offering quad-play services using fiber-based FiOS video and FiOS Internet. AT&T Inc. T has also become a major player in the bundled quad-play offerings after its acquisition of DIRECTV, the largest satellite TV operator.
The industry is wondering whether Charter Communications can survive providing just the triple-play video, voice and high-speed data services. We believe it will be tough for the cable MSO to remain competitive without entering the wireless market.
Price Performance of Charter Communications
Charter Communications’ shares have increased 0.46%, outperforming the industry’s loss of 5.08% over the past 90 days. The company carries a Zacks Rank #4 (Sell). However, Verizon, AT&T and Comcast currently carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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