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Comcast remains plugged in to wireless

by Chris Nolter | Published December 7, 2011 at 4:44 PM

Commercial agreements included in a $3.6 billion wireless spectrum pact between Verizon Wireless and three cable companies were shaped by Comcast Corp.'s reluctance to severe ties to the mobile business, the CEO of the mobile company's parent said at a Wednesday, Dec. 7 investor conference in New York.

Verizon Wireless is paying $3.6 billion for wireless licenses owned by a joint venture of Comcast, Time Warner Cable Inc. and Bright House Networks.

Verizon Communications Inc. CEO Lowell McAdam said at a UBS Investment Research conference that discussions with Comcast began over ways to integrate video over mobile phones, televisions and computers. The negotiations led to the spectrum licenses.

"As I talked with [Comcast CEO Brian Roberts], he said 'Look if I sell you this spectrum that puts me on a particular path, I need to have a fallback that if this doesn't work as well as we hope that I'm not blocked out of wireless,' " McAdam recalled.

The companies will sell each others' products, starting in four markets in January. The cable operators could eventually resell wireless service on a wholesale basis.

The commercial arrangement with Verizon Wireless is more than an afterthought. The marketing deal could represent a détente between long-time rivals that cedes wireline broadband to cable operators and mobile to Verizon.

Cable's previous ventures in wireless have fizzled. The pay-television companies' have had arrangements with Sprint Nextel Corp. Comcast, Time Warner and Bright House also have investments in mobile broadband company Clearwire Corp., which is backed by Sprint and has not fared well.

"This is much different certainly because this is Verizon Wireless, it's the industry leader," Stifel, Nicolaus & Co. analyst Chris King said downplaying any parallels to the Sprint ventures. Cable would have "a viable wireless product for the first time ever," the analyst said.

Remnants of the failed ventures are close at hand. Comcast, Time Warner and Bright House purchased the spectrum licenses that they are now selling as part of a pact with Sprint.

The cable companies and Sprint developed a short-lived service called Pivot. They jointly spent $2.37 billion to purchase wireless licenses at a 2006 spectrum auction. Sprint and Cox Communications exited the JV before the deal with Verizon Wireless.

Verizon Wireless is a much stronger carrier than Sprint, however. The arrival of long-term evolution, or LTE, wireless broadband technology also makes it easier for the companies to develop products with video.

Speaking earlier in the week at the UBS conference, Comcast executive Neil Smit said the deal with Verizon "gives us access to what we feel is the best network out there for a long time," and that Comcast would not need to build or buy a network.

Moreover, Comcast is making a 75% return on the spectrum sale. The company invested $1.3 billion at the 2006 auction, and would receive $2.3 billion in the deal with Verizon Wireless.

Smit said that Comcast will discontinue a wireless product called XFinity 2Go that it sells with Sprint and Clearwire. The company will continue to hold its 9% stake in Clearwire "for the foreseeable future," he said.

Though Comcast may not dump the stake, the ongoing relationship cannot be comfortable.

Comcast CFO Michael Angelakis handled the dicey question of how Sprint CEO Dan Hesse took the news of the deal with Verizon Wireless at the UBS conference.

"You should ask Dan himself for his view," Angelakis said.

Meanwhile, a steering committee formed by Verizon Wireless and its cable partners will hold their second meeting next week to discuss the future of their pact.

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Comcast remains plugged in to wireless

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