T-Mobile to launch TV service in 2018, buy Layer3 TV

T-Mobile US Inc (TMUS.O) said on Wednesday that it would launch a new streaming television service next year after buying startup Layer3 TV for an undisclosed amount.


The moves come as competitors seek ways to provide content to win over customers in a saturated mobile market, and after the No. 3 U.S. wireless carrier and No. 4 rival Sprint Corp (S.N) ended merger talks last month.


T-Mobile Chief Financial Officer Braxton Carter said last week at an investor conference that the company would now focus on smaller, “tuck-in” acquisitions.


T-Mobile plans to launch a subscription service with advertising next year using Layer3’s technology platform and relationships with content providers. The company will create a “variety of offers,” some low cost, its executives said on a conference call with reporters.


While the industry has shifted to skinnier cable bundles, Denver-based Layer3 TV, founded in 2013, has focused more on traditional pay-TV packages, offering more than 275 high-definition channels and 25,000 on-demand titles in five U.S. cities. The company, started by industry veterans Jeff Binder and Dave Fellows, has marketed itself as a next-generation cable service, offering integration of online content with linear, improved customer service and its own proprietary network for higher quality video.


While T-Mobile will not rule out original content, it will not be a focus to start, Chief Operating Officer Mike Sievert said.


Sprint in November said it would offer unlimited data plan customers free subscriptions to the streaming service Hulu LLC, two months after T-Mobile introduced a similar offer with Netflix Inc (NFLX.O).


AT&T Inc (T.N), which is in the process of buying Time Warner Inc (TWX.N) for $85.4 billion, has already started bundling the premium channel HBO with wireless service.


T-Mobile’s service will enter a crowded market for online television streaming that includes competitors such as AT&T’s DirecTV Now and Dish Network Corp’s (DISH.O) Sling TV.


The wireless carrier said it expected its 17,000 retail stores and more than 30 million smartphone shipments per year to help drive customer trials.


“We believe the near-term revenue and profitability outlook will be more muted as T-Mobile scales the product and integrates it with their wireless customer base,” said Jennifer Fritzsche, analyst at Wells Fargo, in a research note. “But we would not underestimate T-Mobile longer-term in the TV space after the disruption they’ve caused in the traditional mobile ecosystem.”


T-Mobile shares rose 0.5 percent to close at $63.83.