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Leonard Grace
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Len Grace is the Founder of Broadband Convergent, a Broadband-Cable-Telecom-Wireless market website focused on highlighting pertinent and relevant issues within technology arenas. Highly researched and experienced insights and opinions both inform and enlighten readers on current industry trends... More
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  • SoftBank To Sprint: We Think You Have What It Takes

    SoftBank to Sprint: We think you have what it takesLet's take a look at this deal pragmatically. Right now it is only a rumor, as both companies have been identified by reliable sources as being in serious merger discussions. Obviously SoftBank Mobile Corporation (TSE: 9984), a seller of mobile communication services along with mobile phones and handsets has become a major player in the Japanese mobile market. In my opinion SoftBank believes Sprint (NYSE: S), has what it takes to grow into a profitable and competitive company.

    Through acquisitions, and currently 3rd largest in market size; SoftBank is ready to become #1 in Japan. Masayosshi Son is the CEO leading the company in aggressive acquisitions and growth. Sprint led by Dan Hesse, is #3 in U.S. market size behind Verizon and AT&T Mobility is working hard to become a major player and competitor to its larger U.S. counterparts.

    Both companies seem to be going in the same direction; and each seeks entry as a major force in their respective markets. The differences which divides these companies, and the question needing an answer, remains why SoftBank might be interested in Sprint with its current debt load, over $21 billion on the balance sheet. But dig deeper and Sprint is making the right financial and market decisions to reduce its debt and improve sales while continuing to upgrade its network. Shutting down the expensive Nextel network will work toward major reductions in costs and associated debt accumulation.

    It could be that SoftBank sees a bargain in the making with a Sprint Acquisition. Sources indicate the price offering is northSoftBank to Sprint: We think you have what it takes of $12 billion U.S. which does not seem enough, but when looking at current Sprint financials indicates a reasonable number. Another caveat to the deal is the financial backing that SoftBank will bring to the deal. Sprint has been struggling for years to make a profit, but may have turned the corner with Dan Hesse's long-term strategy, in growing to meet market competition.

    SoftBank's Annual Report 2012 indicates revenues at $8.65 billion and net interest bearing debt at $7.1 billion. This certainly puts a positive spin on acquisition talks as serious for Sprint to consider being that SoftBank has the capacity to infuse vitality into the #3 mobile operators both short and long-term health.

    The remaining issue is the leadership direction which would result in this acquisition. Japan, while a leading economic power, could never completely understand the nuances of the U.S. market. It must defer to Dan Hesse for that expertise, and as long as he is driving the Sprint helm, this deal looks good.

    Images via Top 10 of City, Sprint

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Oct 11 2:58 PM | Link | Comment!
  • Dish Network Internet: Breaking With Bundled Video

    Dish Network (NASDAQ: DISH), announced the launch of DishNet this past week, a broadband TV service that will target rural areas of the US with a OTT (Over-The-Top) cable service for un-served or under-served consumers. Seeking to break with bundled video, the satellite TV provider is in current talks with Viacom, owner of MTV, Univision, and Scripps Networks for programming rights. As Dish, the second largest satellite TV provider behind Direct TV, moves to enhance its coverage, satellite broadband just may be the key as a differentiator.

    Video Migrating to Web

    Dish Co-Founder Charlie Ergen is seeing a video only service decline as subscribers move to use package deals with cable operators who bundle video, Internet, phone, and now mobile service. Moving to stem subscriber losses, 10,000 in the 2nd Qtr, Ergen believes the launch of DishNet will offer customers a broadband option similar to its pay TV competitors. With TV Everywhere taking hold as a content enhancement for cable providers, Dish Network sees the broadband launch as a way to disrupt the programming bundle. See (Dish Disappoints with Subscriber Losses)

    Demand for Lower Priced Video

    Since the satellite provider has a robust knowledge of subscription video and deals with major video networks, Ergen believes this relationship will work to offer lower priced specific program packages without the extremely expensive sports channels like ESPN. He is confident there is a niche market for consumers who do not watch sports. This would be the first major deal with a video service provider and major video programmers to reach a successful conclusion. Past attempts by Apple TV and Google TV have not been able to swing a sufficient deal. See (Dish Said to Be in Talks With Viacom About Internet TV)

    Video Audience Evolves

    As more young consumers look for alternative video options on broadband, we may be seeing cracks in the long-standing video bundle. This growing market segment cannot be ignored for the long-term since broadband has opened the content revolution in video access. The dynamic of how we watch video will continue to evolve from large bundled content to access to smaller more niche programming. Competition for video access will continue to drive innovation on the broadband front, continually molding the business environment of how video is offered for consumption.

    Cable Watches

    Cable operators will be watching as Dish Networks attempts to make history as the video service provider able to crack the (OTT), video programming package deals. Cable's retail prices must reflect high-costs on offering large video packages. However, the price-point relationship with consumers has reached diminishing returns as mature markets historically end their dominance.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Oct 03 10:58 AM | Link | Comment!
  • Comcast Stock: Forecast Indicates Trouble Ahead

    Comcast (CMCSA) is on a downward trend as analysts predict the stock to decline during the remainder of fiscal year 2012. The bearish market is a factor along with market maturity of the cable industry. As that traditional Cable TV sector continues to lose subscribers the company relentlessly pushes for more incremental revenue per customer. This can be seen in its price bundling strategy. While this strategy props up revenues for the short-term, it does not hold for longer term growth as continued discounting and churn will take effect.

    Analyst reviews of Comcast reveal a hold to sell strategy as negative sentiments in operation metrics continue to indicate trouble ahead.

    • Broadband revenues will continue to grow since effective competition cannot match the standard Comcast has set in speed, access and reliability. However, with companies like Netflix offering cheaper alternatives in video programming, its cable TV business will decline at a steady pace. Broadband revenues are already surpassing a maturing cable division segment as a top producer.
    • An active Department of Justice inquiry into Comcast net neutrality policies regarding its Xfinity Application, tying it to an active company subscription, will draw down on the stock outlook. If this investigation reveals sanctions are in order, which it possibly could, the stock will take a major hit as a result. Comcast's best bet is to settle the issue quickly and move on to more active and competitive scenarios with competitors.
    • Recent partnerships such as the Verizon spectrum sale and marketing agreement seem to be a profitable move by Comcast. Not with standing, the controversial deal hoping to bypass regulatory scrutiny is not a done deal. Legislative approval will have to be forthcoming to make the proposed partnership a reality. This is not a foregone conclusion, by any means.

    My sentiment is a hold/sell on this stock since hurdles remain for Comcast which may drag out for some time before conclusion. Unless the company can move more quickly to reflect a changing marketplace, which large ones usually do not, CMCSA stock performance remains troubling for the foreseeable future?

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Jul 05 4:48 PM | Link | Comment!
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