As mobile and wireline convergence accelerates and competition increases, Goldman Sachs analyst Michael Ng expects 2026 will be a pivotal year for the U.S. telecom and cable sectors and assigns rating on the players accordingly.
Ng views AT&T (NYSE:T) and T-Mobile (NASDAQ:TMUS) as best positioned thanks to investments in spectrum and in modernizing their networks. And as mobile and wireline convergence accelerates, there will likely be 55+ additional U.S. fiber passings between 2024 and 2029. This will provide a “growth driver” for U.S. telecom companies, improving the lifetime value and margins of wireless service through lower churn.
“The next several years should see growth in network traffic that could make differences in network quality more apparent. Given our channel checks we see network quality advantages accruing to T-Mobile given its significant holdings of mid-band spectrum, and AT&T reflecting its industry-leading capital investment and network infrastructure,” Ng said in his research note to clients. Accordingly, Ng rates both T-Mobile (NASDAQ:TMUS) and AT&T (NYSE:T) as a Buy.
Regarding fixed wireless access, T-Mobile (TMUS) has been the most aggressive in this technology given its leading position in low-band and mid-band spectrum. AT&T (NYSE:T) has been “notably” less aggressive, but will benefit from migrations from copper, which is actively being decommissioned, and will “strategically service as a top-of-funnel and stop gap in markets where AT&T will eventually have a fiber presence.”
Ng also gives a Buy rating to Verizon (NYSE:VZ) as the company begins to realize accelerating service revenue growth as consumer wireless postpaid phone ARPU accelerates, and Frontier’s Fios fiber passings growth reaches 35-40 million over time.
Conversely, Charter Communications (NASDAQ:CHTR) and Altice USA (NYSE:ATUS) are both assigned a Sell rating largely on the competitive pressure from fixed wireless access and fiber. Although Charter (NASDAQ:CHTR) can mitigate the competitive challenges in broadband through its initiatives to increase video streaming services to subscribers and forming the foundation for a digital marketplace for customers to upgrade to ad-free service, “growing fiber passings and competition could make activity incrementally more negative for the incumbent cable broadband,” Ng predicts, adding that cable’s efforts to improve its product offering could change its competitive positioning.
Ng also addresses the bundling of wireline and wireless, known as “convergence.” Both cable and telecom companies operate with the thesis that bundling will become the preferred form of consumption. AT&T (T), Verizon (NYSE:VZ), and T-Mobile (TMUS) are best positioned in this category in that order. While consumers view convergence benefits through lower prices, providers benefit from higher lifetime values and lower churn.
However, convergence benefits can still be offset by secular trends, Ng argues.
“Cable companies, which have the largest converged footprints, are still losing broadband subscribers despite offering wireless. We assume the cable companies would have lost more customers if not for bundling efforts.”