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Verizon Buying Prepaid Mobile Provider Tracfone in $6.25 Billion Deal

Phillip Dampier September 14, 2020 Competition, Consumer News, Reuters, TracFone, Verizon 2 Comments

(Reuters) – Verizon Communications said on Monday it will buy pre-paid mobile phones provider Tracfone, a unit of Mexican telecoms giant America Movil in a $6.25 billion cash and stock deal.

Tracfone, which serves about 21 million subscribers through more than 90,000 retail locations across the United States, said more than 13 million of its subscribers rely on Verizon’s network under an existing agreement. Verizon is the largest U.S. wireless carrier by subscribers.

The U.S. wireless industry is concentrated in the hands of three mobile carriers due to several mergers in recent years: T-Mobile, which in April completed its $23 billion merger with Sprint to solidify its position in the United States; AT&T, and Verizon.

America Movil, which was created from a state monopoly, is Mexico’s largest telecoms operator by far and is controlled by the family of Mexican billionaire Carlos Slim, the Latin American nation’s richest man.

Verizon has not historically invested in prepaid compared with its rivals, such as T-Mobile, which revamped its MetroPCS prepaid brand and bought Sprint, which had a large prepaid business.

Verizon’s purchase of Tracfone comes at a time when the pandemic has ravaged the economy and Americans are cutting back on spending.

Tracfone had become popular with the lower end of the ultra-competitive U.S. telecoms consumer market and Verizon plans to provide new products for that segment after this “strategic acquisition,” said Hans Vestberg, chairman and chief executive of Verizon.

“This transaction firmly establishes Verizon, through the Tracfone brands, as the provider of choice in the value segment, which complements our clear leadership in the premium segment,” added Ronan Dunne, executive vice president and group CEO, Verizon Consumer Group.

Shares of Verizon were up more than 1% in morning trading. American Movil shares jumped more than 3.5% when the Mexican market opened.

The deal includes $3.125 billion in cash and $3.125 billion in Verizon stock.

Credit Suisse is acting as financial adviser to Verizon on the deal, which is expected to close in the second half of 2021.

Reporting by Ayanti Bera in Bengaluru and Drazen Jorgic in Mexico City; Additional reporting by Sheila Dang; Editing by Vinay Dwivedi, Will Dunham and Dan Grebler

Spectrum Puts DOCSIS 4 Speed Upgrades on Hold Until 2022; “There’s No Rush”

Facing no significant new competitive pressure, Charter Communications has put DOCSIS 4, capable of bringing dramatically faster internet service to Spectrum customers, on hold until 2022.

Speaking at today’s Bank of America 2020 Media, Communications & Entertainment Conference, Charter chief financial officer Chris Winfrey reassured Wall Street Charter had no plans to surprise shareholders with unplanned increased investment in its broadband service and is in no hurry to deliver DOCSIS 4’s faster internet to its customers.

“We’ll continue to develop the path for DOCSIS 4.0, but […] there’s no rush,” Winfrey said. “There’s still a lot to be excited about DOCSIS 3.1. It’s relatively untapped in terms of the throughout it can give us.”

Charter’s last significant upgrade effort was rolling out DOCSIS 3.1, a project that ended in 2018. Since that time, Charter has done little to raise internet speeds for all of its customers. Spectrum residential customers in some areas of the country receive 100/10 Mbps service while others receive 200/10 Mbps for the same price. Spectrum has dragged its feet on upgrading the remaining half of its footprint to 200 Mbps service, and there is no sign if or when it will upgrade the rest.

At the same time, Charter is petitioning the FCC to end important pro-consumer deal conditions that were required as part of the FCC’s approval of the 2016 merger between Charter and Time Warner Cable and Bright House Networks. The company is seeking to end a prohibition on implementing data caps. 

Although the company denies it has any immediate plans to implement compulsory data caps, Charter’s announcement it has no plans to announce any new material spending on DOCSIS 4 for the next two years might leave customers with stagnant internet speed and the eventual introduction of data caps.

Winfrey assured investors the company does not have to rush investment on DOCSIS 4.0 upgrades.

“We’ll make sure [upgrades occur on] a normal cycle as opposed to a big bang upgrade,” Winfrey said. “I don’t think it will dramatically change our capital intensity profile.”

AT&T, one of Charter’s largest competitors, has concluded its fiber expansion project, which means Charter’s only new, near-future competitive threat will come from a handful of independent fiber overbuilders that offer gigabit internet speed in some cities at competitive pricing. But most overbuilders are capital constrained, limiting the pace of their expansion. That may explain why Charter does not feel any pressure to upgrade service, especially when the only alternative is slow speed DSL service from the phone company.

Hostile Takeover Faces Resistance: Altice USA and Rogers Want Atlantic Broadband and Cogeco

A Quebec-based cable company is the target of a hostile takeover by a pair of larger American and Canadian cable operators that would like to divide up the assets for themselves, but have met strong resistance from the family that controls Cogeco and Quebec politicians worried about job losses in the province.

Altice USA, which owns Cablevision/Optimum and Suddenlink in the United States, made an uninvited bid of $7.8US billion on Wednesday to take control of Cogeco, a Canadian cable operator that offers service in parts of Ontario and Quebec, and also owns American subsidiary Atlantic Broadband. If the takeover is successful, Altice has agreed to sell Cogeco’s Canadian assets to telecom giant Rogers, Canada’s largest cable operator.

Louis AUDET, head of Cogeco

The Audet family, which holds 69% of Cogeco’s voting rights and 82.9% of the voting rights at Cogeco Communications through subsidiary Gestion Audem, Inc., quickly rejected the offer.

“Members of the Audet family unanimously reiterated that they are not interested in selling their shares. The family takes pride in its stewardship role in both companies, offering high-quality services to its customers, enriching the communities in which they operate and creating superior returns for shareholders through sound growth strategies,” said Louis Audet, who serves as president of Gestion Audem, Inc.

Cogeco has been a frequently rumored target for an imminent corporate takeover, much like America’s Cablevision was when it was controlled by the Dolan family. Ongoing consolidation among telecom companies in Canada and the United States have disfavored medium-sized cable and phone companies, making them ripe for takeover bids. Cogeco’s unique position in territories where much larger Rogers Cable operates in Ontario and Videotron in Quebec has inspired near-constant rumors that Rogers would acquire Cogeco to complete cable consolidation in Ontario and gain entry into parts of Quebec. Rogers already owns 41% of the subordinate shares of Cogeco and 33% of those of Cogeco Communications, which gives them a minority stake and voice in the company. Partnering with Altice USA to do a deal would spare Rogers from having to arrange a sale of Cogeco’s American operations.

In addition to strong resistance from the Audet family, the transaction immediately was ensnared in the cultural and economic hornet’s nest involving Ontario and Quebec provincial politics. Quebec politicians are highly sensitive to takeovers involving Quebec-based companies, especially those coming from Ontario. In 2000, Rogers’ attempt to acquire Videotron stirred controversy over moving the cable company’s headquarters out of Quebec in favor of Ontario. The fact Rogers is based in English-speaking Canada also did it no favors. French Quebec’s Quebecor acquired Videotron instead.

Once again, political differences between anglophone Ontario and francophone Quebec quickly re-emerged after news of the offer went public.

In an interview with Quebec City radio station CJMF, Quebec’s Premier François Legault immediately dismissed the takeover bid.

“It is out of the question to let this Quebec company move its head office to Ontario,” Legault said. “We talked this morning with Louis Audet […] and we’ll do whatever it takes to keep the head office here.”

Pierre Karl Péladeau, president and CEO of Quebecor, which owns Videotron, also slammed the deal on Twitter, claiming Rogers would eliminate Cogeco’s major corporate presence in Montréal Place Ville Marie, and move everything to Toronto. Péladeau noted Cogeco’s most valuable and experienced employees are not “flying whales” prepared to uproot their lives and relocate to Ontario.

The sensitivity of watching job losses in Quebec in return for job gains in Ontario is not likely to be missed by Quebec’s politicians and could bring significant opposition to a deal if Altice USA sweetens its offer to a level deemed acceptable enough by the Audet family to sell.

Spectrum Rolls Out $29.99 K-12 Student Internet 50/5 Mbps Plan

Phillip Dampier September 1, 2020 Charter Spectrum, Consumer News No Comments

Charter Spectrum has introduced a new budget-priced internet plan for households with students, offering a 50/5 Mbps internet connection for $29.99 a month.

Spectrum’s unusual discounted internet plan bypasses the usual paperwork verification that low-cost internet options usually require by contracting directly with area schools that would offer the plan to their existing students. The service is managed by Spectrum Enterprise, a commercial services division at Charter Spectrum.

Connie Lack, a Charter representative who briefed members (sub. req’d.) of Cleveland City Council’s Finance Committee this week about the plan, explained that at least 50 connections per school would be required to offer “Stay Connected K-12” to students. The plan is available to students, teachers, and staff of public, charter and parochial schools.

The plan includes free Wi-Fi service and equipment and offers unlimited access with no data caps or speed throttling. Anyone can access the service, but there must be at least one qualified student in the home to keep the plan.

The plan appears to be Charter’s answer to students that lack quality internet connections at home to take advantage of in-home schooling during the COVID-19 pandemic. But unlike other plans, Spectrum closely partners with educational institutions to market, manage, and maintain the service.

“‘Stay Connected K-12’ allows schools to offer high-speed, cable broadband Internet access direct to students, educators and staff in their homes so learning, teaching and working are uninterrupted,” a brochure about the service explains. “It offers schools and districts flexibility to add locations where access is needed and remove locations when it is no longer required. Schools and districts can simply provide the details of residences in need of access and Spectrum Enterprise takes care of the rest.”

Signing up for service must be handled through a participating school, not Charter Spectrum. Once signed up, Spectrum will send a self-install kit with all necessary equipment and instructions. If your school is currently not enrolled in this program and needs more information, you can share this phone number with school officials so they can get more information: (866) 850-5136.

AT&T Reportedly Looking for a Buyer for DirecTV, But Some Are Skeptical a Deal Can Be Done

Just five years after buying DirecTV for $49 billion, AT&T is looking to sell the satellite TV service after losing over 10 million customers because of repeated price hikes, network blackouts, and the ongoing shift to streaming online video.

The Wall Street Journal reported Friday that AT&T was in talks with private equity firms, potentially including Apollo Global Management and Platinum Equity about the possibility of acquiring DirecTV and taking the service private.

Regardless of who buys the service, AT&T might lose $30 billion on the five-year-old venture, buying high and selling low at a price that could drop below $20 billion. AT&T is rapidly losing its television customers. More than six million people have dropped TV packages from AT&T’s U-verse TV and satellite provider DirecTV in the last two years. Craig Moffett, an analyst with MoffettNathanson, told the New York Post even at a rumored discount sale price of $20 billion, AT&T may have “overvalued” the “albatross.”

Moffett is skeptical buyers will close a deal, considering AT&T’s remaining 17.7 million television customers are still in the mood to cancel, with an “astounding” 18% of customers leaving each year.

But even with the customer losses, DirecTV moves a lot of money through its operations, making it at least look attractive on certain buyers’ books. DirecTV’s cash flow helped AT&T’s own unimpressive earnings, adding $22 billion to AT&T’s balance sheet since buying the satellite company. A buyout by a private equity firm could further slowly drain DirecTV by saddling it with debt, secured in part by its still healthy cash flow. A buyer could also attract investors by borrowing even more to pay out handsome dividend bonuses. That could leave DirecTV hopelessly hobbled in debt, leaving DirecTV in an “inevitable” position of having to merge with its chief competitor, Dish Network, or face eventual bankruptcy. If that were to happen, rural Americans could face a satellite TV monopoly as their only choice for live video entertainment.

DirecTV customers report innovation at the satellite service seems to have disappeared since AT&T took over. Very little has changed with the service in the past few years, except for AT&T raising prices and getting stingier with promotions. Many rural DirecTV customers still depend on satellite television because of a lack of over the air reception or broadband service. For these customers, saving money on television service means having to bounce back and forth between Dish Network and DirecTV, trying to keep a discounted promotion active on their account. If the two satellite services eventually merge, that will cease.

After AT&T acquired Time Warner (Entertainment), insiders report many of AT&T’s legacy businesses, including DirecTV and U-verse, have become afterthoughts. AT&T’s bigger priorities now lie with its new 5G wireless service and HBO Max, its new online video service. But the company’s most profitable businesses continue to be cell phone service and selling wired broadband internet access, which together now earns the company over $180 billion annually.

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