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.
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