Winter solstice greetings from Cedar Rapids (IA), Kansas City (MO) and balmy Fraser (CO), this year’s gathering spot for the Christmas holiday. We hope you and your family have a joyous time.
As mentioned in the last Brief, we will share some thoughts on key events that defined 2025 for the telecom industry. We received over twenty nominations over the last two weeks and have incorporated those into our analysis below. Welcome comments as always to [email protected].
Thank you for the many thoughtful comments on the AT&T and Verizon Briefs. They are on track to be the most read analyses of the year. The January 4th Brief will preview the Consumer Electronics Show (CES). While we’ll unfortunately be skipping this year, there are plenty of AI advancements to cover.
The Fortnight That Was
Another quiet week for both the Fab Five (+$13 billion for the week, and -$278 billion for the fortnight) and the Telco Top Five (+$3 billion, -$22 billion). While there is concern about mounting debt levels driven by increased data center capital expenditures, the four companies in the Fab Five who are spending the largest amounts of money continue to have negative net debt (and will throughout 2026). Arguments in the research we have read center around knockoff effects from players such as Oracle, Blue Owl, Coreweave and others who are making commitments that rely on a rapid adoption.
Having lived through the dotcom bust (2001-2004 for the telecom industry) and witnessed the rise of smartphones and applications for the decade following, it’s way too early to declare this capital cycle a dud. There is a balancing act underway between inference, computing, and response – no one wants to be too far ahead or too far behind their counterparts. This careful industry orchestration is a lesson from the dot-com era where fiber deployments proliferated but data center capacity waned (power requirements were greater than originally planned, rendering large portions of Exodus and Genuity data centers unusable).
The Fab Five has a substantially larger market capitalization than both the telecom and utilities industries. As a comparison, the equity market value of the five largest publicly traded utilities (NextEra, Constellation, Southern Company, Duke Energy, and American Electric Power) is roughly $525 billion, smaller than the Telco Top Five and notably smaller than Meta’s equity value ($1.66 trillion), the smallest of the Fab Five.
It is not surprising, then, to see many deals involving long-term power purchases and Fab Five operators. There’s Microsoft and Constellation Energy’s deal to restart the healthy Three Mile Island reactor announced last September (here), and Amazon’s deal with Talon Energy announced in June (here), and Google’s deal with NextEra energy to restart the Duane Arnold Energy Center just a few months ago (here). Orchestrating power delivery with data center construction milestones and customer commitments is critical to maximizing ROI.
One important distinction between the capital boom of the 1990s/ 2000s and today is the importance of productivity. The advancements of the earlier capital cycle enabled globalized call centers, ecommerce storefronts, and asymmetric digital streaming of content. Offshore (or nearshore) call center employees were often paid (much) less than their onshore counterparts. Productivity was likely worse, but total costs were lower.
Ecommerce shifted distribution away from traditional warehouses to large Amazon sortation centers. That infrastructure enables intelligent agents to analyze and present alternatives for a wide array of purchases. In many respects it’s an extension of the last cycle. What this means for the United States Post Office is a great question, but AI developments directly improve the value of the tens of billions of dollars Amazon has invested over the last two decades.
The most interesting development is in the area of digital content. The 1990s and 2000s witnessed the rapid rise of physically stored content (DVDs proliferated), and in January 2007 Netflix began to offer digital streaming through their “Watch Now” product. As we enter 2026, few need to be educated on how to navigate Netflix, Amazon Prime Video, YouTube, Disney+, Hulu, Peacock, or many other alternative available content libraries.
One of the most interesting announcements in December was the deal struck between Disney and OpenAI (here). Here is a description of the interactive digital content agreement reached between the two companies (Sora is OpenAI’s short- form generative AI platform):
“As part of this new, three-year licensing agreement, Sora will be able to generate short, user-prompted social videos that can be viewed and shared by fans, drawing from a set of more than 200 animated, masked and creature characters from Disney, Marvel, Pixar and Star Wars, including costumes, props, vehicles, and iconic environments. In addition, ChatGPT Images will be able to turn a few words by the user into fully generated images in seconds, drawing from the same intellectual property. The agreement does not include any talent likenesses or voices.”
Think of how this format will be used on May 4th in the first year that it’s fully operable (Star Wars fans understand this holiday). While James Earl Jones’ voice will not be a part of the greeting or meme, the ability to personalize a greeting for a particular venue will be very popular (Sora currently carries a $19.95/ month subscription). Personalizing a birthday party or other special event will follow. Multiply that by decades of libraries (Scooby Doo, Power Rangers, SpongeBob SquarePants) and various holidays (Fourth of July, Halloween, and even Election Day) and the array of monetization opportunities is endless.
What has Hollywood concerned, however, is the ability of “two guys in a garage” to create the next content blockbuster. Something as simple as “Create a comedy about a talking horse who becomes the hero of a small town in the rural Midwest” might sound like a 1960s show called Mister Ed but could be modernized just enough to create a viral sensation.
We think that content creation could change how kids learn. Miss Thomas will be replaced by Captain America, Batman, or the latest sports hero. Facilitation will still be needed, but instruction will be left to the digital instructors.
Bottom line: Gemini defines productivity as “the efficient measure of output (goods, services, accomplished tasks) compared to the input (labor, time, resources) used.” Improved organization of digitized content, combined with the establishment of accurate, correlated data relationships could change how we work. But it’s going to take a lot of power, structures (good for CellSite), bandwidth and computing.
Telecom 2025 – The Year in Review
We have chronicled many events this year through dozens of interim and full Briefs. Here are the events that we think have shaped (or will shape) the industry in 2026 and beyond. They are in no particular order and are as follows:
1. Executive leadership changes. Srini replaces Mike, Dan replaces Hans, Mike (slowly) replaces Brian. One of these would have had an impact on the industry, but three transitions in a year signals a trend. Dan Schulman wasted no time with revamped (and aggressive) fourth quarter offers, and Srini Gopalan had little to learn and is rapidly changing T-Mobile’s operation.
Many direct reports left or retired as well. Callie Field, Ulf Elwadsson, and Janice Kapner have left or are leaving T-Mobile. Others are being elevated at Verizon as outlined in Diana Goovaerts’ excellent article in Fierce Network (here). On top of this, Verizon eliminated 13,000 positions in November – the aftershocks of that headcount earthquake have yet to be felt.
What this means: New bosses bring lots of changes. The relative stability at Charter and AT&T help them hit the ground running (although Charter is also preparing to acquire Cox). The new terms of a renegotiated cable MVNO deal with Verizon will be an important event to watch in 2026.
2. More industry consolidation. Charter and Cox announced their combination in mid-May, and it’s not dead yet. In fact, it’s more likely to complete in 2026 than not. This creates additional pressure on Comcast as they will no longer be the largest cable company in the United States after Cox/ Charter is approved. Charter is well versed on managing integrations and recognizing synergies. We would not be surprised to see additional consolidation involving the Suddenlink properties now owned by Altice, and a finally-healthy Mediacom Communications.
What this means: If interest rates remain low, 2026 will be the year of cable re-clustering. There are also a few MVNOs that might be acquired by their host network operators. Finally, we think that MetroNet and/or Lumos could be consolidators of smaller pure-play FTTH providers on behalf of T-Mobile and their private equity partners.
3. Equipment Installment Plan Expirations. AT&T and Verizon reaped the benefits of lower upgrades for the first three years after they altered their EIP plans in 2022 and 2023. Those plans began to roll off in the first quarters of last year and have snowballed through the fourth quarter. Meanwhile, T-Mobile stayed on 24-month EIP terms for their postpaid customers. We think this increases the postpaid retail wireless “jump balls” for T-Mobile more than their competitors. Each of the carriers have balance sheets to support some promotional expansion, but we believe that T-Mobile has the greatest cash pile.
What this means: More competition throughout 2026. Smartphones are becoming more affordable with the latest promotions, and we think those will be extended even with continued shortages of certain color/ memory sizes. T-Mobile is poised to be the winner as Verizon and AT&T EIP expirations accumulate.
4. Spectrum sales by Echostar and US Cellular enable additional capacity. In August, Echostar announced a $23 billion spectrum sale to AT&T, which was followed by two additional sales to Starlink for $20 billion in September and November.
AT&T wasted no time, electing to lease the spectrum from Echostar until the transaction is approved. This enabled the company to quickly deploy that capacity for data-hungry postpaid wireless customers and AT&T Internet Air subscribers.
Starlink’s use of their spectrum is different from AT&T and will take 2-3 years (or longer) to deploy. It puts them in charge of their destiny, however, and not subject to onerous roaming agreements.
What this means: Echostar shareholders are extremely happy with the stock up 360% in 2025. As of this writing, the company has a greater market capitalization than Charter. Once again, Charlie Ergen appears to have defied the odds.
5. AT&T Internet Air begins to hit its stride. As we discussed in the last Brief, AT&T’s Internet Air has contributed to 800K fewer cable or other broadband additions over the twelve months ending September 30. The Echostar purchase increased the footprint for both consumers and businesses, with speeds increasing by as much as 55% (more details in this AT&T blog post).
What this means: AT&T will be able to compete more effectively in their legacy copper footprint and also offer bundles in new markets. This benefits the traditional postpaid retail wireless business as well as revenue growth. It also will lead to accelerated rural penetration by T-Mobile and Verizon in 2026.
The telecom industry is starving for value creating opportunities and industry stability. None of the wireless companies have deployed enough bandwidth to accommodate the AI wave that is about to extend to every smartphone. Fixed wireless provides relief from poorly performing DSL and older DOCSIS networks today but need additional spectrum (and 6G algorithms) to create long-term value. And, except for AT&T, the other four companies in the Telco Top Five are all going to be experiencing management changes in 2026. Happy New Year.
Who is the leader in a year? We think it’s still T-Mobile because they don’t have the 36-month equipment installment plan runoff and have a great balance sheet. We also think that the remaining Magenta management team is strong. We would not be surprised, however, to see a very strong performance from AT&T entering 2026 and Verizon as we hit the second half. Meanwhile, the Fab Five will probably grow another couple of trillion dollars as AI continues to expand. The valuation gap between the Fab Five and the Telco Top Five is widening, and that should concern the industry.
We will usher in 2026 on a more positive note with our Consumer Electronics Show (CES) preview. 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 Chiefs and Davidson College Basketball!
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.
