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Comcast Pushes Past 1.2M Mobile Subscriber Lines

Jeff Baumgartner
1/23/2019
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Comcast tacked on 227,000 Xfinity Mobile subscriber lines in Q4 2018, expanding its total in that category past the 1.2 million mark.

Powered by its MVNO deal with Verizon Wireless and Comcast's own WiFi infrastructure, Comcast launched Xfinity Mobile in May 2017, and continues to bundle that service with broadband and the MSO's other offerings.

Xfinity Mobile is still operating at an EBIDTA loss -- $191 million for Q4 2018 and $743 million for the full year -- but is "on track" to achieve the primary objective of generating "positive standalone economics," Michael Cavanagh, Comcast's senior EVP and CFO, said on Wednesday's earnings call, without pointing to a specific timeframe. "We're very pleased with this performance in mobile, so far, and the value it adds to the bundle."

Comcast Corp. (Nasdaq: CMCSA, CMCSK) has been reporting Xfinity Mobile results out of its "corporate and other segments" during the early phases of the offering, but plans to include those financials with the company's overall cable results starting with Q1 2019 earnings, Cavanagh said. "We're at a level where we're really pleased with what we see happening in the mobility business and, hence, the move into the cable business," he added

Though Comcast said it has been pleased with Xfinity Mobile's subscriber results, some analysts were expecting more. In a research note, BTIG Research 's Walter Piecyk said that the 227,000 Xfinity Mobile line adds in Q4 were down from his estimate of 300,000, while the 855,000 adds for all of 2018 came in below investor expectations of about 1 million.

Meanwhile, Comcast Chairman and CEO Brian Roberts had "no new revelations" on the company's plans for the 600MHz spectrum it holds. He noted that Comcast, on the whole, remains pleased with its MVNO relationship with Verizon.

NBCU eyes scale with its OTT angle
A chunk of the call was spent digging into NBCUniversal LLC 's plans to launch a direct-to-consumer streaming service in the first half of 2020. That service, which will include a "light" and targeted advertising load, will be offered for free to about 54 million of Comcast's and Sky's pay-TV customers and for a fee (the price hasn't been announced) to others. (See Can NBCU Crack the Economics of OTT?)

NBCU's coming OTT service, which will tap into infrastructure used for Sky 's NowTV platform, aims to scale rapidly without causing Comcast to break the bank. Cavanagh said the offering-in-development will have a negligible impact on Comcast's financial results in 2019.

"We're excited about our approach," Steve Burke, NBCU's CEO, said. He noted that the broader part of the plan is to help the programmer do a much better job monetizing NBCU's content as viewership increasingly goes online.

Serving consumers inside and outside the pay-TV universe will give the OTT service "a much better chance to get to scale quickly," Burke said. "We think it's highly likely that'll reduce the amount of investment we need to make coming into the business and also accelerate our ability to get to break-even."

Video losses improve in Q4
Back to cable, Comcast's pay-TV service continues to struggle amid the cord-cutting threat, but its video results were better than expected.

Comcast lost 29,000 video subs in Q4 (including 19,000 residential and 10,000 business video subs), compared to a loss of 38,000 in the year-ago quarter, and better than video subscriber losses of 62,000 that analysts were expecting. Comcast ended 2018 with 20.95 million residential video subs and just over 1 million video subs coming the way of its business services offering.

Roberts said Comcast's video strategy will continue to focus on the most profitable segment of that market. The company will "intelligently still invest in our video business, but not chase every single subscriber all the time," he added.

Broadband remains a bright spot, as Comcast added 351,000 subs (323,000 residential subs), in line with last year's gain of about 350,000.

Business services also remained solid, as revenues there grew 9.5% to $1.8 billion in Q4.

Total cable revenues for Q4 2018 rose 5.2%, to $14.1 billion as Comcast continues to focus on its higher-margin "connectivity" lines of business (residential broadband and commercial services), which together grew nearly 10% in 2018.

Comcast said Q4 cable capex rose 7.6%, to $2.3 billion, driven by investments in infrastructure and seasonal consumer premises equipment spending. However, cable capex fell 3%, to $7.7 billion, for the full year driven in part by a decline in video-centric CPE spending. (See Cable & Wireless: A Tale of Two Capex Scenarios in 2019.)

Sky synergies
Comcast's Q4 results included financials from UK-based Sky from October 9 through the end of 2018. Q4 revenues at Sky rose 5.6%, to $5 billion as the company added 164,000 customers in the period. (See Will Comcast's Pricey Play for Sky Pay Off? and Comcast Posts Q4 Revenues of $27.8B, Up 26.1%.)

In addition to having NBCU tap into Sky's NowTV infrastructure for the coming OTT service, Comcast and its new acquisition are pursuing other opportunities to meld technologies.

Sky, for example, plans to deploy Comcast's "xFi" whole-home WiFi management platform for its broadband launch in Italy. "WiFi coverage in the home is a real-world customer opportunity for us to improve," Jeremy Darroch, group chief executive at Sky, said on the call. (See CES 2019: Comcast Secures the Smart Home and Comcast Unlocks xFi-Powered Smart Home.)

Sky, he added, also plans to integrate Comcast's voice search and navigation platform (used today for X1) for the company's Sky Q pay-TV product.

— Jeff Baumgartner, Senior Editor, Light Reading

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