If the wide-moat company gains any significant traction, expect the four major carriers to improve the relative attractiveness of their offerings.
held an analyst event to introduce its widely anticipated Mobile Virtual Network Operator, or MVNO, service that will be branded as Xfinity Mobile and hosted by Verizon. While the company did not announce a specific date, we expect the service will launch before the end of the second quarter. The service will be aimed at the company’s current customer base of 25 million home Internet subscribers, and management expects the product to help increase the uptake of the firm’s bundled services. While we believe that the product (and its low price) will appeal to some Comcast subscribers, we note that the wireless business has been extremely competitive in the U.S. with the four major carriers reacting aggressively to any major or even minor change by competitors. Thus, we project that if Comcast gains any significant traction, the four major carriers will find methods to improve the relative attractiveness of their offerings, which may be difficult for Comcast, as an MVNO, to match. We are maintaining our wide moat rating and $33 fair value estimate for Comcast. With shares trading in 2-star territory, we viewed shares as overvalued and would wait for a pullback before investing.
Neil Macker, CFA, is an equity analyst for Morningstar.
While the company was vague about a potential launch date, management did provide significant details around the network, pricing, phone availability, and marketing for its new service. Xfinity Mobile will operate on Verizon’s network as a byproduct of the sale of AWS spectrum by Comcast and other cable firms to Verizon in 2012. Comcast claims to be receiving favorable pricing on data from Verizon which will make the service profitable even at low subscriber levels. The service will also aggressively use the firm’s 16 million Wi-Fi hotspots to offload data usage, and the phone will switch over to Wi-Fi with no user input. Unlike the four major wireless carriers, Xfinity Mobile will not zero rate data from its own video services or any other service.
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