Broadband services

Comcast Kicks A$$, Earns $80B in 2016

Like a rolling snowball gathering mass on a downhill slope, Comcast's success in video and broadband is starting to appear as inevitable and unstoppable as gravity. As part of $80.4 billion in total revenue for 2016, Comcast added 161,000 video subscribers -- 48% of which have the advanced X1 video platform -- and 1.4 million Internet subs on cable revenue of $50 billion.

Compare that to Charter Communications Inc. , which lost roughly 175,000 residential video subscribers in the first three quarters of 2016 (including Time Warner Cable and Bright House Networks results from just before their acquisition); AT&T Inc. (NYSE: T) which ended 2016 down 133,000 video subscribers year-over-year, not including new money-losing DirecTV Now customers; and Verizon Communications Inc. (NYSE: VZ) which added 59,000 video subscribers in 2016, but is likely seeing lower average video revenue per user thanks to a growing number of customers taking less-expensive Custom TV packages. (See AT&T Swears by DirecTV Now and Verizon Uses Fios as Shiny Object in Q4.)

AT&T and Verizon also lost Internet subscribers between 2015 and 2016, while Charter has so far reported an impressive gain of 1.1 million Internet subs in the first three quarters of 2016.

All told, Comcast Corp. (Nasdaq: CMCSA, CMCSK) now has 22.5 million video customers (compared to #1 AT&T with 25.5 million video subs) and 24.7 million high-speed data customers, the most of any wireline Internet service provider in the country. (See Comcast Earnings Rise in Q4.)

The market showed its appreciation for Comcast's performance, inflating the company's stock price more than 2% after quarterly and full-year earnings were announced this morning. Comcast beat analyst estimates for Q4, closing out the quarter with an earnings per share number of 89 cents compared to expectations of 86 to 87 cents in EPS. Revenues were also higher than expected, with Comcast posting just over $21 billion in the fourth quarter including both its cable and NBCUniversal LLC operating segments compared to analyst forecasts of $20.7 billion. Full-year revenue reached $80.4 billion.

Comcast also announced a 15% increase on its dividend and a two-for-one stock split that will go into effect in February.

Revenue returns for Comcast are partly a result of the money the company is investing in its business. Capital expenditures were up in total by 7.5% in 2016 to $9.1 billion. Cable capex increased 7.9% to $7.6 billion, with $1.2 billion going to business services. Going forward Comcast expects capex to stay roughly the same in 2017, but with spending shifting away from customer premises equipment (CPE), which ate up nearly half of spending last year, and more toward network investments.

Interested in fixed broadband market coverage and insights? Check out our dedicated Gigabit/Broadband content channel here on Light Reading.

If there was anything surprising in today's earnings call, it was that Comcast was willing to provide a few more details on its upcoming wireless activities. The company said it will launch its much-anticipated wireless service around mid-year, and that it will buy handsets up front, with customers expected to pay back the cost of their mobile devices over time.

CEO Brian Roberts also answered analyst Craig Moffett's questions about whether the company's MVNO partnership with Verizon might be the final stage of Comcast's wireless ambitions, or whether the company might go further, implicitly asking if Comcast has the intention to buy a wireless carrier in the future. Roberts responded, "I believe that we'll find out, but we're hoping that [the MVNO deal is] an end-state strategy and that it's sustainable."

The answer from Roberts confirmed Moffett's own conclusion in an earlier research note where he declared, "The market's expectation that Comcast will buy their way into the wireless market stems from the widely-held view that the Verizon MVNO can't possibly be a satisfactory strategy. But the MVNO may be getting a bad rap ... At the very least, we think Comcast and Charter will wait to see what comes of their hybrid MVNO/MNO network before even considering buying wireless."

On Comcast's future in a 5G world, executives also provided a little more color today on how they expect the cable company to play a role. The CEO of Comcast's cable business, Neil Smit, said Comcast is testing the ability of its network to support 5G rollouts, noting that the new wireless technology will need cost-effective real estate, power and backhaul.

"We have, call it 150,000 miles of fiber across 650,000 miles of total plant," said Smith, "and we think that we're well-positioned to participate in the 5G rollout no matter how it happens as the result of having all those assets in place already."

Regarding its business services segment, Comcast ended the year with $5.5 billion in revenue, and is now approaching a run rate of $6 billion. Growth has continued to slow quarter over quarter, dropping from the upper teens in percentage terms at the beginning of 2016 to growth of 14.5% year-over-year in the fourth quarter. However, Comcast said it expects the segment to continue to grow by double-digit percentages for several years with large revenue opportunities ahead. In particular, Comcast sees a $13 to $15 billion revenue opportunity in the enterprise market.

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— Mari Silbey, Senior Editor, Cable/Video, Light Reading

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kq4ym 2/6/2017 | 10:13:55 AM
Re: Comcast Data Interesting how almost half of the new customers chose the X1 platform at what I've thought was a bit pricey. Unless you really really want to get the absolute best in speed and features, I'm not surprised that half of those new subscribers chose to opt out instead getting a lesss expensive option.
Duh! 1/27/2017 | 1:24:36 PM
Re: Comcast Kicks A$$ I haven't yet had a chance to read the earnings report. However, based on the trends of the past many years, I would be willing to bet that almost all of that $6 is being passed through to content providers.
f_goldstein 1/27/2017 | 11:00:50 AM
Re: Comcast Kicks A$$ There seems to be a real disconnect at Comcast between the suits and the handful of actual techies who care. The engineers are doing some interesting things, and both their video (VoD, STB) and data products are fairly advanced. The suits are in charge, however, and seem to be following the time-tested strategy that Chrysler Corp. did so "wel"l with under John Riccardo in the 1980s. He sent accountants around the company regularly demanding that cost be removed from every product, every operation. The impact on quality and revenues was not factored in. So quality suffered and the products didn't sell but the accountants smugly claimed to improved profits by removing cost.

Comcast's phone support now seems mostly to be in the Phillipines. They don't know anything. They don't care. And they don't get stuff fixed. Their web site has been broken for weeks: Just try to "add a user" under Users & Preferences. Not there. No way to manage sub-accounts. Just an example of how they've lost control over operational matters where they used to be pretty good. But hey, they probably claim big savings from reducing the number of website maintainers. Or offshoring them to Lower Slobovia.
FbytF 1/27/2017 | 8:51:15 AM
Re: Comcast Kicks A$$ The video and internet quality are not bad when the service is working but when there's a problem they are the absolute worst.  Your first stop is a help desk in Mexico that is absolutely no help. They're scripted agents that sound condensending when they stay on script. They have no skills, no tools other than to send a reset signal to the cable modem. They have no escalation process. They have no view of anything going on in the network so after 15 minutes or so they will schedule a dispatch to fix the problem.  The dispatch will usually be 4-5 days out unless you raise hell. Usually an hour or so after calling the no help desk the service starts working on its own. I don't call to cancel the dispatch because it takes forever on hold but you get an automated call an hour before the scheduled tech's appointment informing you the service appears to be working and would you like to cancel the call?  Then there's the app, worthless POS. All the app tells you is your cable modem appears to not be connected, NO SH%T, really!  I could go on forever but why bother, I have no option. All Verizon offers is 1.5M DSL and satelite service, they clearly don't won't to be in the fixed line business.  So I'm stuck with these Comcast morons.
freehe 1/26/2017 | 11:28:30 PM
Comcast Wireless If Comcast offers wireless service I will not be a customer.
freehe 1/26/2017 | 11:27:08 PM
Re: Comcast Kicks A$$ @msilbey, thanks for the great article.

I agree Comcast has a long way to go in terms of providing good customer service. I guess the video customers aren't concerned about quality video service or may actually be receiving good quality video service.

freehe 1/26/2017 | 11:25:18 PM
Comcast Data "Comcast added 161,000 video subscribers -- 48% of which have the advanced X1 video platform -- and 1.4 million Internet subs on cable revenue of $50 billion."

This makes sense since the video market has a large demand. However, I am surprised that only companies did not fare as well.

freehe 1/26/2017 | 11:22:29 PM
Re: Comcast Kicks A$$ @FbytF, I totally agree. Comcast increases their prices every year but the service gets worse every year.
msilbey 1/26/2017 | 4:29:26 PM
Re: Comcast Kicks A$$ They say net promoter score is up for customers with X1, but clearly Comcast hasn't cleared its support and service hurdles. Still one of the most hated brands in America.
msilbey 1/26/2017 | 4:28:08 PM
Re: The importance of being earnings Appreciate the reference, and yes, I considered the use of the word earns in the headline, and decided that at face value it works. Comcast earned $80 billion in revenue. Net income or profit is another story. 
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