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Comcast ( CMCSA ) plans to file as a bidder in next month’s auction of wireless spectrum, the cable TV firm confirmed on its earnings conference call Wednesday, in a move that could reshape the telecom industry. One big question is whether Comcast aims to be a national player in wireless or provide mobile video services within its service area. Comcast has been building out a public Wi-Fi network using unlicensed spectrum within its local markets. If Comcast aims to go national, it could team up with another cable firm, Charter Communications ( CHTR ); or it could acquire feisty T-Mobile US ( TMUS ) or debt-laden Sprint ( S ); or it could partner with industry powerhouse Verizon Communications ( VZ ), perhaps the most attractive option from a balance-sheet view. “Wireless is a national market, and it’s the nature of mobility services that customers don’t only use them in their home markets. Eventually, if Comcast is going to be a player, they will need to have a national solution,” said Craig Moffett, analyst at MoffettNathanson. Comcast hiked its stock repurchase program by $5 billion, at the low end of analysts’ estimates amid concern that Comcast would indeed bid in the auction and how much it might spend. In 2015, Comcast repurchased 115.9 million shares for $6.75 billion. Comcast raised its dividend in 2016 by 10% to $1.10 per share. Analysts at Morgan Stanley, Citigroup, Jefferies and Deutsche Bank have estimated Comcast will spend $4 billion to $6 billion in the spectrum auction. Comcast Not Committing To Bid Comcast CFO Michael Cavanagh, on the company’s earnings conference call, said the $5 billion added to Comcast’s stock buyback program would not be lowered by possible auction spending. He also said Comcast might end up not bidding at all vs. AT&T ( T ), Verizon and T-Mobile. Sprint has said it will sit out the auction. Some observers also speculate Google owner Alphabet ( GOOGL ) could file as a bidder, though the Internet giant did not say so on its earnings call on Monday. “We’re going to take a paddle in the auction, which means we’re going to evaluate, consider purchasing spectrum, but only if the price is right after we do our evaluation of what’s available,” said Cavanagh. Comcast stock rose 6%, to 57.84, in the stock market today . The Federal Communications Commission plans to begin the Broadcast Incentive Auction on March 29. Comcast, however, said it expects the auction to start “late spring or early summer.” The auction, which could last as long as five months, will free up an estimated 60 megahertz to 80 MHz of prime, low-frequency radio spectrum owned by local TV broadcasters. For the auction to be successful, bidding prices have to reach levels high enough so that TV broadcasters follow through and sell spectrum. Low-frequency airwaves travel over long distances and through walls, improving in-building services. AT&T and Verizon own more than 70% of low-frequency airwaves in the top 100 U.S. markets. AT&T acquired satellite broadcaster DirecTV in July, putting pressure on Comcast to push into wireless. The jury is still out on whether AT&T’s strategy to sell product bundles of wireless and pay-TV services will jell, analysts say. Comcast has rights to lease wholesale network capacity on Verizon’s network. In the industry, network-leasing deals are referred to as MVNO (mobile virtual network operator) agreements. Verizon and Comcast have seemed at an impasse in reworking terms of their 2011 deal to account for exploding data traffic and 4G services. Verizon, though, could still partner with Comcast, an option that becomes more plausible if it divests its landline FiOS TV business. Another Comcast option is partnering within the cable industry. Charter Communications, which is seeking regulatory approval to acquire Time Warner Cable ( TWC ) and Bright House Networks, has declared wireless ambitions. But, Charter will likely sit out the TV broadcast auction. “Longer term, they may do something with Charter,” Moffett added. “But until Charter’s deal is approved, Charter’s hands are very likely tied. Comcast will have to make decisions about a national offering on their own.” T-Mobile Still Searching For Partners Some analysts say that the network reach and quality of a hybrid Wi-Fi/cellphone network would not be sufficient vs. the combo of AT&T-DirecTV. That’s why speculation that Comcast could buy T-Mobile persists. T-Mobile has openly courted cable industry partners. On the other hand, if cable TV companies emerge as serious players in wireless services, on their own or through a Verizon alliance, it increases competition and could open the door to a T-Mobile-Sprint merger, some analysts say. Comcast, which owns NBCUniversal, reported Q4 revenue that topped analysts’ estimates, but profit was light. Comcast added 89,000 video subscribers, up from 6,000 in the year-earlier period. Comcast has stepped up promotions of lower priced skinny bundles with fewer TV channels and promotions to college students. Comcast added 460,000 broadband customers in Q4, up from 375,000 added in the year-earlier period. Analysts say its deployment of Internet-ready X1 set-top boxes has also improved video subscriber results. X1 users represent 30% of its video subscriber base, Comcast says. Excluding the acquisition of Universal Studios Japan, Q4 revenue rose 7.6% to $19.1 billion. Adjusted EPS rose 5.2% to 81 cents. Analysts had modeled revenue of $18.76 billion and profit of 82 cents. Comcast said it expects cable programming costs to rise 10% in 2016 as it negotiates new contracts for on-demand and out-of-home viewing rights to content. In Q4, cable capital spending rose 10.2%, to $2.1 billion, the company says. NBCUniversal’s revenue rose 13% to $7.5 billion in Q4. Operating cash flow rose 8.7% to $1.6 billion, boosted by film and theme parks, but OCF fell 1.9% at cable networks to $894 million. Scalper1 News
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