T-Mobile US (Buy): is Malone up to his old tricks?

The authors of the content on this page from Sept 2012 to June 2017 are:
Market Commentaries: Gary Paulin, Ameet Patel, Paul Moran, Douglas Morton, Oliver Sherman, Ben Brownette, Rob Arnott, James Santo, Neil Campling
Research: Ameet Patel, Paul Moran, Douglas Morton, Oliver Sherman, Rob Arnott, Neil Campling

Time Warner Cable should be a consolidator” – John Malone in 2013 as quoted by Reuters. Fast forward two years and TWC was consolidated itself, acquired by Malone’s own Charter Comms. Horizontal acquisitions, grow scale, synergies, and form consortiums with peers – this is the old Malone MO of TCI (1970s to 1990s). It is also the ‘new’ Malone MO of the 21st century. So it is worth noting Malone’s comments last night, although it should be caveated as theoretical commentary, that, “…one (strategy) would be maybe the three major cable companies get together and buy T-Mobile.” The problem being that U.S. cable companies don’t have ubiquity in the market whereas cellular services need to be ubiquitous. Malone’s international cable business, Liberty Global, led the quad-play market charge in Europe and began rolling out the cellular part of the quad with an MVNO led (rent rather than own) footprint but subsequently has begun to build out owned networks through opportunistic deals (Holland JV with Vodafone and Belgium Base acquisition). The same path seems set to happen in the U.S.

Interestingly T-Mobile’s CEO last week suggested the cable industry’s attempts to enter the wireless industry will fail with both Charter and Comcast entering the market by MVNO agreements with Verizon Wireless. Perhaps if they do, the discussions to own rather than rent (cellular coverage) will again rise to the fore. While current predictions and headlines will likely remain theoretical until the new U.S. government is in place, future policy made clear and the future of the FCC decided, the future seems set for a new chapter in creating next generation oligopolies.

NB: we remain buyers of T-Mobile US (see our TMT weekly of January 7th for our latest thoughts).