Cable companies Comcast Corp., Time Warner Cable Inc. and Bright House Networks are giving up on their dreams of creating their own wireless network, opting instead to resell Verizon Wireless service.
The companies said Friday that they have agreed to sell their wireless licenses — which they haven't been using — to Verizon Wireless for $3.6 billion.
Cable companies have long had ambitions to get into wireless, and some of them have linked up with Sprint Nextel Corp. and Clearwire Corp. to offer service. Lately, there has been speculation that the cable companies would invest in ailing No. 3 and 4 carriers Sprint or T-Mobile USA to gain access to the wireless market, particularly since AT&T Inc.'s deal to buy T-Mobile USA is firmly opposed by regulators.
The link-up with No. 1 carrier Verizon Wireless and the sale of the spectrum appears to preclude a deal between a cable consortium and one of the weaker players in wireless. Instead, the biggest cellphone company will strengthen its hand, if the spectrum sale is approved by regulators.
U.S. Shares of Deutsche Telekom AG, the parent of T-Mobile USA, were down 25 cents, or 2 percent, at $12.53 in morning trading. Sprint shares were down 1 cent at $2.69.
"It's really hard for a cable company to expect to compete in a highly competitive wireless market," said Time Warner Cable spokesman Alex Dudley. He pointed to Cox Communications, another cable company, which this year shut down its plans to build out a wireless network.
"We got a good price for the spectrum," Dudley said. "An arrangement like this makes a lot of sense."
The cable companies paid $2.2 billion for the spectrum in 2006, so they're getting a 64 percent gain on a five-year investment. The spectrum covers about 85 percent of the country's population, and would have been sufficient to start up an independent wireless network.
Shares of Philadelphia-based Comcast rose 77 cents, or 3.4 percent, to $23.34. New York-based Time Warner Cable shares rose $1.90, or 3.1 percent, to $62.82. Orlando, Fla.-based Bright House Networks is privately held.
Time Warner Cable currently resells access to Clearwire's wireless data network as "4G" service. Dudley said it could continue to provide service to existing subscribers, but the arrangement with Verizon Wireless is exclusive, so it will stop selling to new subscribers.
Comcast, the country's largest cable company, owned the majority of the spectrum holding company, and will get $2.3 billion from the sale. Time Warner Cable, the second-largest cable company, will get $1.1 billion. Bright House, the sixth-largest, will get $189 million.
The three companies and Verizon Wireless will resell each other's services, so it will be possible to sign up for cable service in a Verizon Wireless stores.
Billing will be separate, but the cable companies have the option to start selling Verizon Wireless service under their own brand in four years. Cox had a similar arrangement with Sprint, but gave it up last month, saying it was too small to compete with the big cellphone companies.
Verizon Communications Inc., the New York-based phone company that owns 55 percent of Verizon Wireless, runs its own, competing cable-TV service called FiOS in some areas. In the rest of its local-phone territory, it resells satellite TV service from DirecTV Group Inc., based in El Segundo, Calif.