If we were forced to make a choice to buy either cable or telco stocks right now, we would pick the telecom companies. The telcos have sharpened their focus on their core business after years of also trying to be media companies. Also, connectivity beyond mobile devices is accelerating (e.g., connected vehicles) and new use cases for 5G are around the corner.
On the other hand, cable companies’ core video business’s death is only accelerating, and their residential broadband growth engine has also stalled. While they’re making real headway in wireless, and a MVNO model helped them get off the ground with a low fixed investment, it also has severe limitations in terms of margin upside.
Furthermore, we believe the flood of government subsidies for expanding broadband access will favor fiber, long the chosen technology for telcos. If cable companies pivot to fiber and rollout wireless networks using CBRS spectrum in high traffic areas to offset MVNO costs, we’d be tempted to favor cable companies.
