Sprint Nextel said Thursday it has expanded its agreement with Time Warner Cable, the second-largest cable operator in the United States, to offer voice services to the cable firm’s customers.
The new five-year agreement adds another 14 service areas in which Time Warner will use Sprint’s wireline network to offer VoIP services to the cable company’s voice subscribers.
Sprint currently connects more than 1.2 million cable VoIP customers, and the Reston, Virginia-based carrier is expected to double that number to 2.5 million in a year.
Despite the deal, shares of Sprint Nextel fell $2.77 to $17.36 in recent trading, while Time Warner shares dropped $0.17 to $16.50.
Time Warner, the New York-based parent of Time Warner Cable, announced on Wednesday that it added more than 234,000 new VoIP subscribers in the second quarter, bringing its total to 1.6 million.
That places Time Warner Cable in the third spot among cable companies offering voice services.
Cox Communications, which has more than 1.8 million voice customers, continues to lead, barely, followed by Comcast in second place with 1.7 million.
Handing off Traffic
The deal between Sprint and Time Warner Cable will involve the handoff of long-distance traffic from Time Warner’s network to the Sprint network.
Sprint will also provide Emergency 911 services to Time Warner Cable’s voice customers.
Until it sold off much of its local phone business, Sprint used to be one of the largest wireline telephone companies in the U.S.
The company, which operates the third-largest wireless network in the U.S. after Cingular and Verizon Wireless, has built an extensive business around the cable industry.
Last November Sprint teamed with cable leaders Comcast, Time Warner Cable, Cox Communications, and Advanced/Newhouse in a joint venture that will allow the cable firms to resell Sprint’s wireless services.
Sprint invested $100 million in the deal while the cable operators together added another $100 million.
The $200-million investment is going toward the development of integrated voice, data, video, and wireless services, and marketing efforts.
Phone Company Incursions
Cable companies are facing incursions into their pay-TV distribution businesses by phone companies. AT&T and Verizon Communications are now offering all four services in much of their coverage areas.
Both AT&T and Verizon own wireless carriers and they resell satellite TV services as part of their voice, data, video, and wireless packages.
But both phone companies are also upgrading their networks to offer IPTV services. Verizon has already begun rolling out its IPTV services in a number of markets across the country.
Offering multiservice packages has proven to be quite popular among customers. Surveys have shown that customers favor the discounts inherent in these packages, and the single-bill option.
By reselling Sprint’s wireless services, the cable operators can match the phone companies in their ability to offer the full complement of four services.
“Our vision for the cable initiative, whether it’s wireline or wireless, is to deliver compelling, integrated services that provide unique value to customers,” said Gary Forsee, Sprint Nextel’s chief executive.
“This expanded agreement with Time Warner Cable is illustrative of our company’s growing importance in the cable sector,” he concluded.
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