Why Sprint wants a merger with Charter so badly
For the past few days, rumors have been swirling that Sprint wants to merge with Charter Communications. If the two got together, it could be a major deal, combining the wireless and cable industries in a big, new way. But now reports from Bloomberg and The Wall Street Journal suggest that Charter, the nation's second-biggest cable company, simply isn't interested in a deal.
There are indications that Sprint and its parent company, Softbank, aren't yet ready to give up on Charter. But why is Sprint so seeking a tie-up with the cable giant in the first place, and why doesn't Charter want to partner with America's fourth-biggest cellphone carrier? Below, we've laid out everything you need to know about the latest consolidation rumors.
What would a Sprint-Charter merger mean for me?
It could mean new bundles of services. You might, for example, be able to buy Sprint's wireless service together with Charter's cable service. And much like AT&T has done with DirecTV, it's possible Sprint could seek to put Charter's video content on mobile to attract and retain customers.
How would this help Sprint?
Sprint has been struggling to stay competitive against the likes of Verizon, AT&T and T-Mobile for some time now. The company has failed to invest in its network, analysts say, resulting in a poorer experience for consumers and subscriber losses that have further weakened Sprint's ability to adapt to a fast-changing industry.
Big telecom companies are increasingly buying the rights to media and entertainment content, which they believe is the key to building new business models. These strategies turn not just on the provision of cellphone or internet service, but also on the sharing and selling of customer data for advertising - just like Facebook and Google.
Sprint's leadership appears to be betting that the company can pull off a similar strategy if it links up with a cable firm. If that's true, it could help pull Sprint back from the brink.
How would this help Charter?
Cable companies have been looking for a reliable answer to the trend of consumers shifting their internet usage to smartphones and tablets. Not only are Americans increasingly using handheld devices, but they're also taking those devices outside the home - which is where the traditional base of power for the cable industry lies.
Companies like Charter and Comcast are exploring the idea of offering cellular service but only on a limited scale. Comcast began taking sign-ups for its new mobile plan, Xfinity Mobile, this spring. Charter's is still in the works and will be launched sometime next year, according to company officials. The concept depends on users doing most of their mobile browsing from cable-controlled public Wi-Fi hot spots, but since those aren't everywhere, the industry needs cellular service from a telecom company to help fill the gaps.
In theory, a tie-up with Sprint could give Charter that coverage, as well as new ways to market and distribute its video product.
So why isn't Charter interested?
Well, as we already mentioned, Sprint's network isn't in the best of shape. And since Charter is working on a pilot of its wireless plans, it's still early enough in the process that the cable company can afford to wait, said Walter Piecyk, an industry analyst at BTIG.
"[The price] might be more attractive later if they are successful with their wireless MVNO strategies," said Piecyk, using the acronym to describe the cable industry's approach of piggybacking on other telecom networks for extra coverage.
Charter and Comcast both have a partnership with Verizon, which is providing the backup cellular coverage for Xfinity Mobile and will also be the partner for Charter. Charter says that its MVNO relationship with Verizon is "very good."
Also complicating things is a pact between Charter and Comcast that was signed earlier this year. Under the agreement, each cable company vowed not to pursue any merger with a wireless carrier without the participation or go-ahead of the other. If Charter were to enter into a merger with Sprint, Comcast could have the power to kill the deal.
What happens if Sprint can't get a deal with Charter?
Even as Sprint tries to dance with Charter, it is also still reportedly interested in merging with T-Mobile. Some analysts say this smacks of desperation as Sprint's troubles mount.
What happens to Charter?
Charter has been the subject this year of merger rumors with Verizon. Although nothing appears to have come of those discussions, and the likelihood of a Sprint deal now seems even more remote, it underscores the possibility that Charter could eventually sell to somebody.
After President Trump's election victory, some analysts predicted a frenzy in merger activity. While in one sense the rumors surrounding Charter and Sprint could reflect the latest in that phenomenon, other analysts have pointed out that the pace and tenor surrounding acquisitions this year has been much more restrained than initial forecasts may have suggested.