Comcast Corp and Charter Communications Inc will announce a wireless partnership on Monday, according to a source familiar with the matter, as the cable providers prepare to enter a highly competitive and oversaturated market for mobile service in the United States.
The partnership is aimed at cutting the significant costs of entering the wireless market, as well as speeding up entry, the source said. The deal will bar either company from entering into a material transaction for a year without the other company's consent, the source said. That would prevent either company from tying up with a wireless carrier immediately on its own.
In January, Reuters reported Verizon Communications Inc was interested in exploring a combination with Charter as part of a long list of acquisition targets, but no proposal had been made for a tie-up between the two companies. Analysts and investors have also speculated that Comcast could buy a U.S. carrier, such as T-Mobile US Inc or Sprint Corp, as its ambitions grow in the wireless market.
At a Lions Gate Entertainment Corp investor conference in January, John Malone, whose Liberty Broadband Corp is Charter's largest stakeholder, raised the possibility that major cable companies could get together and buy T-Mobile.
Monday's agreement between Comcast and Charter will allow the companies to cut costs and share technology expertise, as well as offer customers benefits such as seamless connection between their Wi-Fi hotspots, the source added, asking not to be named because the matter is private.
JPMorgan Chase & Co analysts wrote in January that building a wireless business could cost Comcast hundreds of millions of dollars annually in the first few years, potentially cutting as much as 5 cents to 10 cents off earnings per share in 2017.
Representatives for Comcast and Charter declined to comment. Representatives for Verizon and T-Mobile could not be reached immediately for comment.
Comcast in April gave new details about its plans for a wireless service, which will launch on Verizon's airwaves as part of a 2011 agreement between the two companies. The service will allow customers to switch automatically to Comcast's Wi-Fi hotspots from 4G LTE. It will launch in coming weeks, the source said.
Comcast is moving into wireless as cable companies seek to add more services to reduce customer churn, or attrition, as younger viewers shun high-priced subscriptions in favor of cheaper online options.
Rival Charter has said it will introduce a mobile service in 2018.
The Wall Street Journal first reported the partnership, without giving further details.
(Reporting by David Shepardson in Washington and Olivia Oran and Anjali Athavaley in New York; Editing by Sandra Maler and Randy Fabi)