April greetings from Cedar Rapids, Kansas City and Wilmington, NC. We reunited with family at a wedding and managed to snap this pic from the Wrightsville Beach Pier. May is still around the corner, but the summer heat is already popping up along the Carolina coast.
This was a topsy-turvy week for earnings with three of the Telco Top Five (AT&T, Comcast, and Charter) reporting. While broadband seemed to fall in line with the narrative (although slightly weaker than expected at Charter), wireless results were all over the board. We will analyze the three carriers who reported through Friday and prognosticate which of the remaining two picked up the wireless subscriber slack.
There were many responses on LinkedIn and emails to sundaybrief@gmail.com concerning our last Brief (“Can Cable Grow Again?”). They ranged from “yes, cable is unappreciated” to “you are crazy – cable is never coming back.” Keep the comments coming – reality lies somewhere between these extremes. What is becoming apparent (and referenced by AT&T, Comcast, and Charter) is that understanding underserved segments (for AT&T, it might be value- or budget-conscious consumers) is critical to gaining incremental market share.
The Fortnight That Was
Over the last two weeks, the Fab Five have increased their total market capitalization by $1.26 trillion dollars. The group is now up for the year ($2.7+ trillion change from the end of March). Three of the five stocks are now up for the year, and Microsoft has halved its early-year losses. A lot could change this week as each company announces first quarter earnings, but we think that cash flow growth remains strong and that capital spending remains largely on track.
The Telco Top Five also saw some changes this week, especially with companies who announced earnings. Charter lost more than a quarter of its value on Friday (see picture nearby – we analyze why below), and wiped out Thursday’s gains for their peer Comcast (down 7% for the week on the heels of a turnaround earnings report).
The other big loser for the week was T-Mobile (-$9 billion). A mere $13 billion now separates T-Mobile from Verizon (they started this year at $48 billion and 2025 at $88 billion apart). This week’s losses were not primarily triggered by earnings but by a report that the owners of T-Mobile USA (Deutsche Telekom) were going to combine the more valuable subsidiary into the parent (Bloomberg article explaining how that would happen is here).
The benefits to the deal are great for both the German parent and the more valuable US subsidiary. It would give them greater leverage over wireless technology standards. When they talk to Apple or Starlink, they would speak on a global basis. Advertising and branding synergies would increase, as would the strength of global partnerships. It might even force other international alliances and combinations like (gasp) BT and AT&T or (double gasp) Verizon and Vodaphone.
Enough of the hype. The reality is that T-Mobile USA already enjoys significant purchasing power, and that both companies routinely court intercontinental customers and exercise influence over wireless standards. The German government and state-owned bank KfW own between 27-28% of Deutsche Telekom today ($157 billion market cap). Roughly $100 billion of that $157 billion market cap is attributed to their 53% stake in T-Mobile USA. Even if the parent were to offer 10% more than today’s depressed value, the German government and KfW would still own 12-13% of the new entity. It’s hard to see how that would survive Brandon Carr’s (FCC Chairman) or Jim Jordan’s (Chair of the House Judiciary Committee) scrutiny without a plan to divest some if not all ownership over a short window.
Perhaps more details will be announced on T-Mobile’s earnings call this Tuesday. We think that some activity related to a potential purchase of some of the Uniti assets is a much more exciting story (more on that here from Fierce Network). Our advice to both parties is to “take it slow,” especially if this is a play related to a potential tie-up with a cable partner.
Regular Sunday Brief readers were not surprised to see Apple’s announcement of John Ternus replacing Tim Cook as CEO of Apple (a picture of them at Apple HQ is nearby). We think John is the best choice and that Tim will still be around (we view that as a good thing). Many tributes will be written celebrating the Cook Era, but a return to a hardcore technologist could be exactly what Apple needs at this time.
Hardware is more than what is stylistically displayed and seen daily. An attractive color means nothing if the chipset and operating system are not working in harmony, or if the components cannot be sourced consistently to meet expected demand, or if the price is out of reach for global consumers. Hardware relies on the physical world with unbending laws and rules. Heat dissipation, battery life and weight distribution keep many hardware engineers up at night. Simply put, hardware design needs to accommodate the wide array of today’s and tomorrow’s software needs. Without properly designed hardware, innovation would be stunted.
That’s why having a CEO with a lengthy hardware background is the perfect solution for Apple. John started with the company just as the iPod was coming to market. He has lived through multiple growth curves for multiple products and will use iOS as the springboard to AI. Best of all, he is widely respected within the company – there will be no learning curve (or honeymoon). Global diplomacy can be learned from one of the best business diplomats in recent memory, but the ability to quickly transition to a hardware-leaning global technology could not occur without John’s resume.
One final note – per Friday’s Bloomberg report, Google is investing up to $40 billion in Anthropic (with $10 billion of this in cash right away). We realize that this may have folks scratching their heads – isn’t Google’s Gemini a competitor to Anthropic’s Claude product? Actually, this is an investment from Google Cloud, who will provide 5 gigawatts of computing capacity to Anthropic as the platform continues to grow. Since Anthropic is dependent on Google, Nvidia, and others for computing power (which is currently scare), and their platform adoption is increasing quickly, this announcement is not a big surprise. With Gemini and Claude battling it out with ChatGPT for leaderboard superiority (see llm-stats.com leaderboard stats here), strange bedfellows will emerge.
Q1 Earnings Review – The Case of the Missing Subscribers
After AT&T, Comcast and Spectrum reported earnings last week, one thing stood out to us – wireless growth slowed. Comcast is still catching up to Charter’s penetration level (still 20% smaller after Q1 although they pass nearly the same number of homes) – and that gap should narrow. But AT&T and Charter (who have a lot of overlapping territories – think Los Angeles, Dallas/ Ft Worth, and the Carolinas) both saw slower growth, with AT&T’s due to high gross additions but even higher year-over-year churn (0.89% monthly postpaid phone churn for Q1 2026 vs. 0.83% in Q1 2015) and Charter following the same pattern (higher gross additions, higher disconnects). Where did everyone go?
Some historical context is needed to fully understand the answer. Because of their early versions of their MVNO agreement with Verizon, Charter and Comcast had plenty of incentive to market their wireless product to one- and two-line households. Above that, the profit picture gets murky. Hence the “By the Gig” and low prices for unlimited single-line unlimited plans were featured which were attractive to both the prepaid and postpaid bases at their larger wireless competitors.
Then the Verizon agreement was changed in late 2022, and marketing to three- and four-line households became economically attractive. At that time Charter launched aggressive promotions like “BOGO free for 12 months.” Then came $30/mo. unlimited (tax included) rates for up to four lines and a $40/mo. unlimited offer with faster speeds and higher hotspot allowances. Now, under certain conditions, Spectrum Internet is significantly discounted or even free with four mobile lines (promotion information here). The MVNOs began to steal postpaid family plan market share from Verizon, AT&T, and T-Mobile.
Enter Dan Schulman, Verizon’s new CEO and former head of Virgin Mobile, and Srini Gopalan, who replaced Mike Sievert at T-Mobile. Were they going to let their first Holiday promotions (as CEO) result in net losses? Unlikely. Even with US Cellular integration in full swing, T-Mobile was not going to let 2026 begin with a down quarter.
Where did Charter’s churning customers go if they didn’t migrate to AT&T (note – Comcast and Charter do not overlap territories)? Will they return? When, and under what conditions?
Our guess is that the winner here is T-Mobile (and it’s only a guess – Verizon could have placed emphasis on New York City and Florida and attacked their largest MVNO partner – this seems unlikely, but stranger things have happened). T-Mobile is a familiar brand for middle-income and value-conscious customers, and, if their network improved in that market (or will improve for a customer as a result of a new device), they grew market share.
While these distinctions are never exact (market share gains for each company come from many sources), our hunch is as follows:
- AT&T churn went to Verizon (first) and T-Mobile (second) with Comcast a distant third. AT&T’s focus (based on their most recent earnings call) is on converged (AT&T Fiber) customers. If that means wireless losses in out-of-territory areas (e.g., the Northeast), so be it. That’s why we think Verizon likely picked up more churning AT&T customers than T-Mobile.
- Charter’s churn went to AT&T (first) and T-Mobile and Verizon competing for second. Faced with a new fiber offering, many Charter customers decided to make the switch (see our Brief from last summer titled “Battling New.” It’s complicated, but both things can be true – Charter can have improved NPS but can also lose customers to AT&T Fiber).
- We also think that Verizon may have taken some share from T-Mobile, particularly with some US Cellular customers (re: 20-30K customers picked up from US Cellular in a quarter is a big deal even for a company the size of Verizon). Verizon also turned up marketing in certain metropolitan areas this fall where they had lower network utilization.
While these hypotheses aren’t precise, they do signal increased competition. Even with three major integrations (Lumen into AT&T, Frontier into Verizon, and US Cellular into T-Mobile), the core business cannot miss expectations. When core misses, stock prices drop – a lot.
In the next Brief we will have many earnings themes to cover:
- Hyperscaler capital spending
- Integration updates
- Solving the Case of the Missing Subscribers
In the meantime, if you have friends who are interested in being notified each time we publish a Brief, please have them sign up at www.sundaybrief.com.
Go Royals and Sporting KC!
Important disclosure: The opinions expressed in The Sunday Brief are those of Jim Patterson and Patterson Advisory Group, LLC, and do not reflect those of CellSite Solutions, LLC, or Fort Point Capital.
