Sprint Nextel Corp. today made good on the rumors that it would partner with several cable companies to sell bundled wireless services including pay TV competing against the nations largest local phone companies.
The joint venture among Sprint, Comcast Corp., Time Warner Cable, Cox Communications Inc. and Advance/Newhouse Communications is worth $200 million. Sprint will invest $100 million, while the cablecos put in a combined $100 million. The deal is mutually exclusive for three years and has a 20-year term.
Starting next year, the companies will offer video, wireless voice and data services, high-speed Internet and cable phone services, which could reach up to 75 million homes. Thanks in part to its merger with Nextel, Sprint now has the necessary spectrum to develop a WiMAX network across much of the United States. The cable companies plan to sell co-branded wireless phone service through Sprint’s retail stores and RadioShack Corp. stores.
The companies plan to offer services including the capability for users to remotely program their home DVRs, have one voice mailbox for the home and wireless phone, and surf the Internet using a cable portal.
Sprint Nextel already provides wholesale phone services to cable companies including Comcast and Time Warner.
Todays announcement solidifies that the next competitive war is on the horizon: the local phone companies versus the cablecos. The potential for success is great, notes Jeff Kagan, telecom industry analyst. [I]t changes the way we think about these services, combining them, rather than using separate products on separate networks.
With a new battle brewing, Kagan points out the deal is tremendous news for Sprint Nextel, since its partner cable companies will be selling services over its wireless network.
Over the next few years, depending on how attractively the bundle is priced and how well it is marketed, I can see this being a home run for Sprint Nextel, Kagan says. The combined services will be sold by the cable television companies, but they will also be sold by Sprint Nextel, in a new service bundling offer. We have not seen this before, but this has a large potential for the company.
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