Comcast: cable business firing on all cylinders, wireless doing well, video revenue up

Comcast added another 354,000 total broadband subscribers (334,000 residential and 20,000 business) in the second quarter of 2021, beating the 323,000 it added in the year-ago period. The U.S.’s largest broadband wireline provider ended the quarter with 31.38 million residential and business broadband customers, by far the most in the U.S.

Comcast’s broadband subscriber growth rate is very impressive, at 6.7% YoY, which was unchanged versus last quarter.  Comcast Business was also a bright spot, with a strong acceleration in growth.  Business services revenues were up 9.9% YoY, a huge acceleration from the 6.1% YoY rise last quarter and a beat versus consensus growth of 8.8%.

The strong results are way better than Comcast’s two largest competitors – AT&T and Verizon – which both reported poor Business Wireline results.

New Street Research analysts noted Comcast’s broadband net additions were “well above estimates,” noting it had previously forecast gains of 253,000 and the market consensus estimate was 270,000. Cavanaugh said the operator is now expecting total broadband net additions for 2021 to be up in the “mid-teens” compared to the 1.4 million net adds it posted in 2019.

Other highlights:

  • Cable Segment revenue growth of 10.9% was fully 200 bps ahead of Wall Street consensus for 8.9% YoY growth – but indeed for every sub-segment.
  • Broadband revenues were up 14.3% YoY on a reported basis (versus 13.6% consensus); adjusted for RSN credits in Q2 2020, broadband revenues were up 12.6% YoY.
  • Business Services revenues were up 9.9% YoY (versus 8.8% consensus).
  • Wireless revenues were up 70.6% YoY (versus 63.4%).
  • Comcast’s Xfinity Mobile service added 280,000 mobile lines, a quarterly record for the company, up from adds of 126,000 in the year-ago period. Comcast, which launched mobile (via its MVNO with Verizon) in 2017, ended Q2 2021 with 3.38 million mobile lines. Mobile revenues rose 70.4%, to $556 million.

Dave Watson, CEO of Comcast Cable, said mobile is now tied into every sales channel. And the launch of a new unlimited plans focused on multi-line customers has also led to a “nice shift in mix,” he said.

Cable Communications CAPEX of $1.7 billion was up 16.8% year-on-year in Q2, accounting for 10.6% of the division’s revenue compared to 10.1% of revenue in the year-ago period.

In addition to investments in scalable infrastructure to increase network capacity, Comcast CFO Michael Cavanaugh said on an earnings call the money was spent on broadband CPE and line extensions.

“We have decided to move a bit faster to the next phase of DOCSIS using very cost-effective technology,” he said.

CEO Brian Roberts noted the company has been trialing gigabit and multi-gigabit symmetrical speeds since October 2020 “to great success.” While upstream traffic comprises only 10% of broadband usage on its network and “we don’t really have a consumer use case” for symmetrical speeds yet, “the strategy for our network is to plan ahead,” he said.

“We’re investing in architecture that allows us to go beyond where consumers are, and we can do all of this in a way that won’t affect the capital intensity ratios we currently enjoy,” he added.

Video sub losses continue but less than expected:

Comcast lost another 399,000 total video subs (364,000 residential and 34,000 business) in the period, improved from a year-ago loss of 477,000 customers. Comcast ended Q2 2021 with 18.95 million total video subs.

Nevertheless, video revenues were up 2.6% YoY (versus 0.8% consensus).  Adjusted for Regional Sports Networks (RSN) credits in Q2 2020, video revenues were up 0.5% YoY.

Comcast remains excited about Flex, a video streaming/smart home product it offers for no added cost to broadband-only subscribers. Watson said Comcast has deployed more than 3.8 million Flex boxes, up from the 3.5 million the company reported in May.

Summary:

Consolidated revenue of $28.5 billion grew 20.4% year-on-year, with net income attributable to Comcast up 25.1% to $3.7 billion. Sales for the Cable Communications business increased 10.9% year-on-year to $16 billion.

Broadband revenue was up 14.3% to $5.7 billion, video revenue increased 2.6% to nearly $5.6 billion, business services revenue increased 9.9% to $2.2 billion and wireless revenue jumped 70.4% to $556 million.

……………………………………………………………………………….

References:

https://www.cmcsa.com/news-releases/news-release-details/comcast-reports-2nd-quarter-2021-results

https://www.cmcsa.com/static-files/c53499bd-4ff5-4e44-b793-74f8743a96dc

https://www.cmcsa.com/financials/earnings

https://www.fool.com/earnings/call-transcripts/2021/07/29/comcast-corp-cmcsa-q2-2021-earnings-call-transcrip/

https://www.fiercetelecom.com/financial/comcast-notches-record-q2-broadband-adds-354-000

 

6 thoughts on “Comcast: cable business firing on all cylinders, wireless doing well, video revenue up

  1. Wow, impressive numbers. I don’t see numbers broken out for their ad business, but I suspect that it will have to get stronger with all these new users and endpoints.

    Here is a video with the Managing Director of the Broadband Forum talking about what they are up to and the panel he moderated at the Fiber Connect event this week https://youtu.be/iYgzRwSeWdk

  2. Ken,

    Comcast is not a Google or Facebook which make most of their profits from ad venue. I would submit it’s an inconsequential part of their revenues/earnings and is irrelevant to their bottom line. I would submit almost all of their ad business is from NBC Universal which posted a nearly 33% rise in ad sales.

    As noted in this and many other articles, Comcast’s businesses are dominated by: broadband Internet access (#1 in U.S.), pay TV, wireless subscriptions and NBC Universal (which is the main ad revenue producer based on so many commercials I see when watching ANY NBC channel on TV).

    In a note to clients today, Craig Moffett did not even once mention Comcast’s advertising business.

    Certainly, Comcast’s add revenue will increase but that will be like a drop in the ocean compared to their other businesses.

    1. It’s not obvious how big their ad business is, but I suspect it is material to their earnings. NBC Universal receives probably 50% of its TV and Cable TV revenues from ad sales. Peacock, their OTT network has a significant portion of revenue from ad sales (e.g. an incentive for Comcast to bundle Peacock with broadband is to get more eyeballs for advertising purposes). Finally, through Effectv and its joint ownership with Charter and Cox of Ampersand, Comcast has a strong presence in the local advertising market.

      Interestingly, one of Effectv’ partners is Comcast Business. It makes sense and I know operators who have created bundles of local ads with business services (e.g. a business receives advertising spots if it signs up for business Internet). This type of bundling of seemingly disparate offerings seems like it could be an advantage over competitors without an ad business.

      https://www.effectv.com/

      1. Ken, Comcast’s advertising revenue is critical for Peacock – NBCUniversal’s Premium Advertising-Supported Video-On-Demand Streaming Service (advertising revenue not stated) and somewhat important for their Sky unit (12%), but it is not a meaningful part of their overall revenue and profits. If it was, the company would be highlighting ADVERTISING in their financial press releases and earnings calls. Further, Comcast did not mention advertising on this week’s earnings call and no analyst asked about it during the Q & A. Here are the actual numbers:

        In the 2nd Quarter 2021, Comcast Cable’s advertising revenue was $679M vs Broadband Internet revenue of $5,717M, Pay TV revenue of 5,554M and Business services revenue of $2,202M. Ad revenue was only 2.04% of total revenue for Comcast Cable. Note that Comcast Cable revenue was 56% of Comcast’s total revenue for the last quarter.

        Reference tables at:
        https://www.cmcsa.com/news-releases/news-release-details/comcast-reports-2nd-quarter-2021-results

  3. One also needs to consider NBC Universal and its associated Comcast Cable Networks. NBC reportedly grossed $5B in ad revenue last year.

    https://www.statista.com/statistics/811648/nbcuniversal-broadcast-tv-ad-revenue/#:~:text=NBCUniversal%20broadcast%20TV%20ad%20revenue%202012%2D2020&text=For%20instance%2C%20in%202020%2C%20NBCUniversal's,dollars%20in%20the%20previous%20year..

    The total 2019 revenue for NBC/Comcast’s cable networks (e.g. E! channel, Oxygen, etc.) totaled $11B according to the Wall Street Journal. It’s not unreasonable to think 50% or so came from ad sales with the other 50% coming from fees to cable operators (another $5B).

    https://www.wsj.com/articles/nbcuniversal-chief-takes-aim-at-cable-channel-fiefdoms-in-entertainment-overhaul-11600794819

    Add it all up and it still maybe 10 to 12% of Comcast’s revenue, which may not be material to the overall company. Still, it could be significant if they start to find synergy between the different businesses and can use it as a strategic advantage (e.g. the ad bundling opportunity mentioned previously).

    A recent Forbes article alluded to the idea that Comcast is creating something bigger out of the piece parts of its content and advertising plays with its ONE21 initiative.

    https://www.forbes.com/sites/howardhomonoff/2021/03/23/in-2021-can-nbcuniversal-and-comcast–make-synergy-cool-again/?sh=795aa4414480

    “The first of ONE21’s ‘breaking news’ announcements was in the area of consumer insights. Leveraging the 615 million global consumers of Comcast/NBCU/Sky content, services and theme parks, NBCU has established an ‘Audience Insights Hub,’ sharing its first-party data with its advertising and technology partners and providing them a “clean” environment in which to enter their own proprietary data. None of this is the creation of unimagined technology, but a recognition that for a modern media company to succeed, its audiences and data need to accessible to and actionable by the broader media marketplace.”

    It will be interesting to see how Comcast does in this arena going forward.

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