Comcast on Wednesday reported that the addition of 351,000 residential broadband subscribers helped drive revenue gains for its cable business, even as the company lost 93,000 pay TV subscribers.
On this morning’s earnings call executives emphasized that while Comcast will continue to compete in video, it also plans to keep shifting focus toward the connectivity business that leans on broadband.
Overall, Comcast reported consolidated revenues of $22.8 billion for the first quarter, up 10.7 percent, with strong growth from its NCBUniversal unit.
Revenues for NBCU were up a whopping 21.3 percent to $9.5 billion, reflecting a big boost from the Winter Olympics. Excluding Olympics, NBCU’s cable networks saw revenue jump 6.6 percent.
For its cable business revenues were up 3.6 percent to $13.5 billion in the first quarter, fueled by strong performance in high-speed internet and business services.
Total customer relationships grew by 273,000, leaving Comcast’s subscriber base at 29.6 million and 2.6 percent larger than a year ago.
Broadband revenues grew 8.2 percent to $4.2 billion, with executives noting that 75 percent of residential customers are signed on to speed tiers of at least 100 Mbps and its DOSCIS 3.1-powered 1 Gbps speeds are now available in 90 percent of the company’s footprint. Comcast CEO Brian Roberts said on today’s earnings call that it was still too early to discuss figures for customer uptake on the gigabit service.
Revenue for business services, meanwhile, grew 11.9 percent to $1.7 billion. Comcast added 29,000 business customers and revenue per business customer relationship was up 5.1 percent.
Video revenues declined 0.8 percent to $5.7 billion for the first quarter. Comcast lost 96,000 pay TV subscribers, leaving its base 1.3 percent smaller than the year ago period. As MoffettNathanson analysts pointed out, while Comcast’s video base is shrinking, it is still doing significantly better than the linear pay TV industry as a whole, which is estimated to be shrinking by about 3.5 percent per year.
“Importantly, as Comcast’s video subscriber base declines, their broadband ARPU reflexively accelerates. This follows from the simple unwinding of bundled discounts – what is a discount on the way in to a bundle is a step-up on the way out,” MoffettNathanson analysts wrote in research note. “Add a bit of incremental growth as customers continue to opt for higher speeds, and broadband ARPU increases provide an almost automatic buffer to unit subscribership declines.”
Comcast’s residential broadband ARPU is increasing by 3.6 percent year over year, which the analysts said provides a “very solid baseline growth rate” for the company’s residential broadband segment that currently accounts for nearly 30 percent of cable revenues.
Comcast’s X1 platform is now deployed to more than 60 percent of its customers, and executives indicated CapEx would shift away from video customer equipment and toward connectivity broadband.
On the wireless side, Comcast revealed they now have 577,000 Xfinity Mobile subscribers, adding 196,000 post-paid net additions in the first quarter.
Comcast Senior EVP and CFO Michael Cavanagh said the wireless business is off to a “really good start” and the company is just starting to package mobile offerings with broadband.
Of the recently announced partnership with Charter, Cavanagh said given the amount of alignment between the two operators the collaboration is a logical next step. He noted it will not only help reduce costs but also could be a good operational partnership and will be beneficial to have Charter’s on board when scaling the business.
When asked about broadband competition from emerging 5G services, Comcast Cable CEO Dave Watson said that the business goes through competitive cycles. “We saw that with AT&T moving most of their DSL footprint over,” Watson said, adding that adjustments are then made in order to level off. “We have great momentum. We really like the trajectory of our broadband business.” He noted that while Comcast will continue to test 5G, broadband is the cornerstone, saying “our focus is to continue to build out our network.”
Concurrently with its earnings release, Comcast formalized its $31 billion bid for British pay TV giant Sky. Read more about that here.
