Fly On The Wall And Barron’s are mentioning a rumor that cable giant Comcast (CMCSA) might buy WiMax IPO Clearwire. It is not likely to happen, but it should.
Cable is being attacked on all sides. AT&T (T) and Verizon (VZ) are offering fiber to the home which allows them to compete with companies like Comcast and Time Warner Cable (TWC) for TV and broadband customers. The FCC is taking away cable exclusivity to offer TV in apartment buildings, putting millions of clients at risk to defect to other options. And the commission is also considering putting a cap on big cable company acquisitions.
Cable firms cannot offer wireless telephone service because they do not have the infrastructure. This gives the telephone companies another advantage in terms of offering bundled services.
Clearwire is building a national WiMax wireless broadband service. It will allow both handsets and PCs to hook up to the internet. The start-up will need another $3 to $4 billion to complete its build-out, but, once it is done, the company will be able to compete with the national cellular networks run by AT&T, Verizon, and Sprint.
Clearwire has a market cap of just over $2 billion. It also has almost $1 billion in cash on its balance sheet. Comcast has a $61 billion market cap.
The rumor may be far-fetched, but the idea is solid.
Douglas A. McIntyre
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