Why Comcast Could Invest Significantly on Wireless Spectrum

Although Comcast Corporation (NASDAQ: CMCSA) considers to roll out a wireless service by teaming up with Verizon in 2017, the global cable and entertainment corporation could also make billions of investments to purchase wireless spectrum in a government auction.

Comcast, along with telecommunication companies such as AT&T, Verizon, and T-Mobile USA, has bid for spectrum that owners of television stations presently utilize for the broadcast of their programs.

Alongside qualified telecoms like Verizon, AT&T  (T) and T-Mobile USA (TMUS) , Comcast has bid for spectrum that TV station owners currently use to broadcast their programs.

Although the CEO and Chairman of Comcast Mr. Brian Roberts stated that the firm would roll out its wireless service with Verizon in the following year, analyst Amy Young of Macquarie Capital stated that purchasing spectrum of its own can make Comcast more flexible.

According to the Macquarie analyst, “It gives them optionality to do their own thing or gives them negotiating leverage with Verizon.”

It is not apparent whether the partnership of the cable and mass media giant with the telecom titan, which was started years ago, gives any advantages for the cable operator if it provides its own spectrum.

The company declined to comment on the matter.

In the recent Macquarie survey of institutional investors, the results suggest that more than half anticipate the cable giant to invest $6 billion or even higher when it comes to wireless licenses. The findings of this survey is parallel with the estimates of Yong that Comcast could invest between $5- $6 billion.

Jim Cramer and Jack Mohr stated, “Wireless has always been on the radar within the cable industry, yet unwillingness to invest in the build-out and commit substantial resources without proven return has been the obstacle.”

The mass media conglomerate’s partnership with Verizon gives Comcast entry to the market.

Cramer and Mohr further added ,”Rather than building a wireless network from scratch, Comcast will operate as a mobile network virtual operator (MVNO) reselling Verizon’s service while building upon it with its 15 million Wi-Fi hotspots.”

“The strategy is tactical and a clear attempt at staying ahead of the growing use of mobile content and shift toward cord-cutting.”

Investors and analysts are wondering if the company and, for instance, Charter Communication could establish a wireless alliance. Furthermore, another important aspect to be considered is the regulatory outlook which could be significantly affected by the results of the election.

The FCC is in the next phase of auctioning off the broadcast licenses.

After the initial phase ended in June, the overall amount that broadcasters agreed to sell licenses stood at $86 billion. Wireless carriers did not agree to give payment for the sum and the additional charges that the government would mandate.

This September, the FCC held a second round of bidding with broadcasters, offering to purchase a bit less spectrum. The projections of analysts mainly call for the asking price of broadcasters and the bids of telecommunication firms and other buyers to meet within the range of $30 billion to $40 billion.

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