With the scuttling of its proposed buyout of Time Warner Cable behind it, Comcast is now attempting to regroup by focusing heavily on developing video, broadband and business services, as well as its growing portfolio of amusement theme parks.
Speaking on the company's first-quarter earnings call Monday, Comcast Corp. (Nasdaq: CMCSA, CMCSK) executives said they have moved on from their failed Time Warner Cable Inc. (NYSE: TWC) deal, which fell apart two weeks ago in the face of resistance from US federal regulators. Instead, they are shifting their emphasis back to organic growth in their core business areas.
"Of course, we're disappointed," said Comcast Chairman & CEO Brian Roberts. "But it was a unique, one-off situation… really, we've moved on."
Pressed on the M&A issue later by analysts, a somewhat subdued Roberts also ruled out any further interest in making cable system swaps or deals with Charter Communications Inc. , which had planned to trade and buy systems covering millions of homes with Comcast if the TWC deal had gone through. "At this point, we're not focused on either of those scenarios," he said.
Rather than pursue more M&A deals, Comcast officials are placing renewed faith in increasing their existing businesses within their vast 50-million home footprint. In particular, they're pinning their hopes on re-generating video subscriber growth with a variety of next-gen products and services, led by their X1 IP video gateways.
"Right now, getting X1 rolled out is still the best opportunity at the company in the short run," Roberts declared. He stressed that the biggest US MSO plans to step up its deployment of the X1 again this year, extending its reach beyond the triple-play and some double-play homes that have it now.
Comcast Cable President & CEO Neil Smit said the MSO is enjoying 20% to 30% lower churn rates with the X1. He also noted that X1 customers use video-on-demand (VoD) services 20% to 30% more than the company's other video subscribers. In addition, X1 subs accounted for nearly half of Comcast's new video customers in the first quarter.
Despite the X1's continued popularity, though, Comcast still lost a net 8,000 video subscribers in the first quarter, reversing its gain of a year ago as it butted up against more competition from AT&T Inc. (NYSE: T)'s U-verse and Verizon Communications Inc. (NYSE: VZ)'s FiOS services.
Reflecting the broader industry trend, Comcast racked up a very strong broadband subscriber gain in the winter quarter, picking up 407,000 high-speed data customers for its strongest quarterly performance in that category in two years. As a result, it has now become the latest major US MSO to notch more broadband subs than video subs.
Despite the temptation to use their broadband and wireless reach to take their video products beyond their wired territories through an OTT service, Comcast officials said they still intend to keep their video products focused on their traditional footprint, unlike some of their MSO counterparts. In the latest example of that in-footprint video strategy, Comcast separately announced yesterday that X1 customers can now stream videos live over the Internet from a smartphone to their TV -- or to the TV of another X1 customer -- through a new Xfinity Share app. (See Charter Explores OTT Options .)
"We feel very comfortable in our own footprint," Smit said when analysts asked about Comcast's OTT ambitions. "We'll be focusing there."
On the wireless front, Smit, calling WiFi "a strong and powerful asset" for the company, said Comcast's WiFi footprint now covers about 8.6 million hotspots throughout the US. Yet, in spite of hints on previous earnings calls, he and Roberts declined to discuss any plans to leverage that footprint for new services just yet.
"We're still working on our wireless strategy and how that will manifest itself," Smit said. He noted that Comcast still has MVNO deals with Sprint Corp. (NYSE: S) and Verizon Wireless that it can tap once it's ready to move forward.
— Alan Breznick, Cable/Video Practice Leader, Light Reading