Author(s): Raghu Gopal
On Sunday, Altice USA, the fourth-largest cable company in the country, and Sprint, the fourth-largest wireless provider, announced a strategic mobile virtual network operator (MVNO) agreement that will enable Altice to roll out a cellular service using Sprint's network. Under the terms of the deal, Sprint will exploit Altice's broadband network to accelerate the densification of its coverage. The announcement follows news that Sprint and T-Mobile US have called off merger talks.
Altice, a major communications company from the Netherlands and headed by Frenchman Patrick Drahi, has been looking to expand rapidly in the US through large acquisitions. In 2012, Altice bought Suddenlink, a cable operator with 1.5 million subscribers, and in 2016 completed the purchase of Cablevision, a cable company with about 3.1 million accounts. Furthermore, this past summer Altice was preparing a bid for Charter Communications, the second largest cable provider in the US with 25 million customers. Comcast is the US market leader with about 26 million subscribers.
Comcast, through its Xfinity sub-brand, began offering MVNO services earlier in 2017, running on top of Verizon's wireless network. The service, called Xfinity Mobile, is a so-called "Wi-Fi first" service that takes advantage of Comcast's own network of millions of Wi-Fi hot spots. It's available only to Comcast broadband subscribers and allows the provider to expand its multiplay offers, a strategy that aims to build service "stickiness" and reduce customer churn. Charter plans to roll out a similar MVNO service during 2018. Between Comcast and Charter, more than 100 million individuals would have the opportunity to switch their wireless provider to their cable operator.
Before being acquired by Altice, Cablevision introduced a phone service, dubbed Freewheel, which relied on its network of wireless hot spots for data, voice and texts. The service worked with one smartphone, the Moto G, and needed a constant connection to a wireless router. Although it only cost Cablevision subscribers $9.95 per month, we believe that very limited interest drove Altice to scuttle the service. However, the company can now use a "Wi-Fi first" model, combining its own Wi-Fi access points with Sprint's cellular network.
Access to Altice's network of customers and infrastructure, including new fibre lines, will give Sprint an opportunity to densify its network with the deployment of small cells. Sprint has more spectrum capacity than other US carrier, but at 2.5 GHz, a frequency that requires more cell sites. Earlier in 2017, the carrier introduced its Magic Box signal booster, offered free of charge to select subscribers to magnify the carrier's 2.5 GHz spectrum into the premises (see Should Your Subscribers Build Your Network?).
Altice joins a growing list of virtual operators. In the US alone there are about 125 MVNOs and more than 70 of these use Sprint's network — although network deals aren't mutually exclusive and many MVNOs exploit more than one carrier's network.
For Sprint, the deal shows that it's still an attractive and valuable company, given its ability to enable others to fill a service gap. Sprint and Altice call this a "win-win solution", which is a reasonable description in this case. Both will be a little better off and slightly more competitive. It remains to be seen if the move prompts Altice and Sprint to form deeper ties.
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