What Is Comcast’s Wireless Strategy?
Comcast’s wireless strategy
A few months back, Comcast (CMCSA) announced that it expects to launch its wireless service by mid-2017. The company has an MVNO (mobile virtual network operator) agreement with Verizon Communications (VZ) and Sprint (S). With the renewal of its 2011 agreement with Verizon, the company believes it could generate more value for its shareholders.
The company stated at the Morgan Stanley Technology, Media & Telecom Conference late last month that while it views the renewal of its MVNO agreement with Verizon in the experimentation stage this year, it expects to scale it up in 2018.
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The company also noted that it wanted its wireless business to be positive in terms of its NPV (net present value) and wants it to have a lower churn. Comcast intends to do this by providing its wireless services in a bundle, which will be available only in Comcast’s service areas footprint at first.
Comcast intends to include its wireless product in its bundles of multiple products to improve customer retention and provide more value to customers. Comcast also expects that the launch of its wireless business could impact the 2017 OCF (operating cash flow) of its Corporate and Other segment by around $200 million to $300 million.
Comcast said that its wireless business could impact its working capital due to the provision of handsets. The company intends to buy handsets and collect the payment for handsets from its wireless customers.
Rise in video traffic
According to Cisco Systems’ (CSCO) VNI (visual networking index), at the end of 2015, video accounted for ~61.0% of mobile data traffic in the United States. By the end of 2020, analysts estimate that this figure could expand to ~77.0% of US mobile data traffic.
Comcast makes up 0.82% of the SPDR S&P 500 ETF (SPY). SPY invests 3.4% of its holdings in the computer sector.