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Comcast sees broadband and mobile gains but greater video pain in Q1

Comcast's core broadband business and still-young mobile unit grew in the first quarter of 2020 as the COVID-19 pandemic set in, but the outbreak only amplified losses at the cable op's already struggling pay-TV business.

Broadband
Comcast said broadband, now the main focus of the cable operator's business, added 477,000 customers (including 466,000 residential subs) in Q1, improving on gains of 375,000 subs in the year-ago quarter and marking its best quarterly result in the category in 12 years. The total did not include about 32,000 free Internet Essentials customers added in the period. Comcast ended Q1 with 26.88 million residential broadband subs, and 29.01 million total subs with business customers included.

Speaking on today's earnings call, Comcast Senior EVP and CFO Michael Cavanagh said high-speed Internet sub adds were also off to a "solid start" in April. To help keep the new installs flowing without requring techs to enter customers' homes, Comcast is using a new "drop and go" program to help fuel a self-install model.

"We're not standing still" on broadband, Dave Watson, president and CEO of Comcast's cable unit, said.

While churn is at a low point for all ISPs during an outbreak that has forced millions to stay at home, Comcast is still finding ways to gain share. Watson said some of those gains continue to come from the existing DSL base, customers who have never had broadband before and mobile-only customers that are now finding they need a wired broadband service to suit their needs.

"I think we've proven we can drive connects" during the pandemic, Watson said.

Comcast noted that it has seen a 33% increase in upstream traffic during this period. "Our network is operating incredibly well," Cavanagh said, noting that Comcast continues to conduct about 700,000 speed tests across its network each day.

Video and pay-TV
Video losses widened to 409,000 subscribers, versus a year-ago loss 121,000. Comcast ended Q1 with 19.9 million residential pay-TV subs, and 20.84 million total pay-TV subs.

"We don't see video trends changing as we begin the second quarter," Cavanagh said, noting that Comcast could see a similar acceleration of pay-TV losses in Q2 due to a confluence of start-of-year rate increases, changing consumer preferences (i.e., cord-cutting) and economic stress being inflicted by pandemic.

Comcast was also asked how its pay-TV business is responding to a lack of live sports. Yesterday, New York State Attorney General Letitia James urged Comcast and other pay-TV providers to trim video subscription fees temporarily while there are no live sports being televised.

Brian Roberts, Comcast's chairman and CEO, said this part of the business is "complicated," as it's different for the company's operations in the US and Europe. But he said discussions are underway with various sports leagues on how to get a grip on the situation. The leagues are "ultimately where the answers to some of these questions reside," he said. "The main focus and hope is there is an awful lot of effort to get [live sports] back quickly and safely, and I'm hopeful that's going to happen."

Mobile
Comcast's Xfinity Mobile business continues to grow. The operator added 216,000 new lines in Q1, up from 170,000 adds a year earlier. Comcast ended Q1 with 2.26 million Xfinity Mobile lines.

Although a slowdown of retail sales is expected as some stores are closed, "We continue to be really pleased of the trajectory of the wireless business," Watson said.

Comcast is noncommittal about any changes it might seek in its MVNO deals now that T-Mobile and Sprint have completed their merger. Watson said Comcast still likes its current MVNO with Verizon, but added: "We're always going to be staring at ways of making improvements to it over time, but the fundamentals are very good."

Regarding spectrum coming up for auction, Comcast will remain "opportunistic if it makes sense to our business," Watson said. Recent action at the FCC indicates that Comcast could join the bidding for spectrum in the 3.5GHz CBRS band.

Business services
Business service revenues for Q1 totaled $2.04 billion, up 8% from $1.89 billion a year ago, but Comcast expects this part of the operation, particularly among small- and midsized firms, to be sporadic as some customers pause service as they shut down temporarily (and some perhaps go out of business), while others that remain open look to move up to higher speed tiers.

"There will be some impact for sure as we head into Q2," Watson said, adding that Comcast is still getting a "fair amount" of new connects during this period.

"The fundamentals of SMB are still very good," he said, holding that Comcast is still a "challenger" in that category despite having penetrated about 40% of that market.

Among big moves made during the pandemic, Comcast said 95% of its call center employees are working from home. "Whether or not that stays at that level, [we] don't know," Watson said. "We'll figure out the right balance going forward."

Usage of Comcast's digital tools is also up. Its AI-based Xfinity Assistant has surged 445%. "These things are game-changers and provided an uptick during this period," Watson said.

Financial snapshot
Consolidated revenues of $26.6 billion were down 0.9% year-over-year. Cable revenues grew 4.5%, to $14.9 billion, including a 9.3% increase for its high-speed Internet business. Video revenues of $5.63 billion were flat.

Cable capex dropped 6.9% to $1.3 billion, representing 8.5% of cable revenues. The figures reflect lower spending on consumer premises equipment and line extensions, partially offset by the deployment of more "scalable infrastructure" (i.e., network capacity additions).

Light Reading will have more details about how COVID-19 has affected Comcast's NBCU and Sky businesses and an update on NBCU's controversial moves involving theatrical releases during the pandemic later today.

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— Jeff Baumgartner, Senior Editor, Light Reading

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