Cable Answers Cord-Cutters With Half-Price Cellphone Service

The Wall Street Journal

Altice plans cellphone service costing $20-$30 as cable providers undercut wireless carriers, try to keep customers

BySarah Krouse and Lillian RizzoUpdated

May 28, 2019 9:20 a.m. ET

A new player is about to enter the crowded U.S. wireless market, pitching monthly unlimited data that costs half as much as rivals.

The catch? It is a cable-television company.

Altice USA Inc. ATUS -0.10% is preparing to launch a mobile service likely to cost between $20 and $30 a phone, according to people familiar with the matter. This summer it will join rivals Comcast Corp. and Charter Communications Inc. in trying to persuade Americans to get their wireless service from their cable providers by promising lower prices.

The new service, likely to be called Altice Mobile, will run on Sprint Corp.’s S -2.31% mobile network and relies on customers’ in-home Wi-Fi and the company’s network of hot spots throughout the urban markets it serves, including New York City. The company plans to test the service with its employees in the coming weeks, the people said.

Altice, which has 3.3 million TV subscribers and 4.1 million internet customers, has recently said the company is on track to launch its mobile service this summer. A spokeswoman said pricing isn’t set and the “go-to-market plans are still in development.”

Cable providers are hoping wireless service will make their existing customers less likely to cut the cord and generate additional revenue. Wireless carriers such as Verizon Communications Inc. and AT&T Inc., meanwhile, are betting the advent of faster, 5G networks will enable them to offer wireless broadband inside homes that sidelines cable companies.

Comcast, the biggest cable-TV provider, began selling its Xfinity Mobile service in 2017, and Charter launched its Spectrum Mobile last September. The wireless services are available only to customers who also pay for home broadband.

Both Comcast and Charter charge $45 a month per line for unlimited monthly data. The two also allow their customers to pay for only the data they use, between $12 and $14 per gigabyte.

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Comcast said it has signed up 1.4 million subscribers to its mobile service as of the end of March, compared with 577,000 a year earlier. The majority of its customers are on plans in which they pay per gigabyte. Charter said it had 310,000 mobile customers as of late March.

Unlimited monthly plans for a single phone start at $80 at Verizon and $70 at AT&T, which also gives discounts to its DirecTV subscribers. Both carriers have more than 100 million wireless connections.

Comcast and Charter have added cellphone customers even as the four largest wireless carriers compete for subscribers in the saturated U.S. market. Those consumers, however, have proved data hungry, which can drive up the cost of providing the service. Both cable companies rent Verizon’s wireless network and typically pay based on customer usage.

Charter said at an analyst conference in May that it was exploring building its own small cell antennas to boost its network of Wi-Fi hot spots, which would allow it to unload some traffic in areas with heavy data demands and help it save on costs.

Even though the costs of providing mobile service may be high, the cable companies profit in retention and growth of scale, said Moody’s Investors Service analyst Neil Begley.

Altice has bolstered its Wi-Fi network in advance of its new service and aims to push some mobile traffic onto those hot spots when consumers are away from home, reducing the amount of cellular data they use. That, in turn, reduces what the cable company must pay Sprint.

As part of the arrangement, the broadband provider controls its customers’ wireless traffic and billing, and Sprint is able to build out its own network within Altice’s footprint.

On May 20, Altice secured commitments from T-Mobile US Inc. and Sprint that if their merger is approved, the combined company won’t terminate its relationship with Altice. The wireless companies also promised to make good-faith efforts to expand the agreement to include their combined 5G network.

Charter and Comcast have said that even though their services are new, there are signs that selling mobile service helps reduce customer defections and increase the number of products bought.

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“If you’re able to save customers $800 a year on their mobile bill and you add that into their existing cable service, then I think that you’re going to have a happier customer relationship at the end of the day,” said Christopher Winfrey, Charter’s chief financial officer, at an analyst conference in May. Advertising those potential cellphone savings also can help attract new broadband customers, he added.

Charter, which has 16 million cable TV subscribers, only recently started to allow customers to bring their own phones rather than requiring them to buy a device from the company, a change it expects will attract more customers.

David Watson, chief executive of Comcast Cable, said during a recent earnings call that the company is “seeing some improvement in retention and that’s exactly what one of our top goals were.”

A spokesman for Cox Communications, another cable provider that has offered mobile phone service at times over the past decade, said the company continues to explore launching wireless service in the future but has no immediate plans to do so.

“We have built out extensive Wi-Fi capabilities through infrastructure investment and industry partnerships,” he said, pointing to Cox’s investment in InSite Wireless Group LLC, which constructs and operates communications tower sites.

Write to Sarah Krouse at sarah.krouse@wsj.com and Lillian Rizzo at Lillian.Rizzo@wsj.com