Comcast broadband subscriber growth slows; Business services and Xfinity Mobile gain

The pace of broadband subscriber growth at Comcast slowed to 300,000 in Q3 2021.  The +300,000 net adds were in line with analyst expectations of +296,000.  But those gains were down from 633,000 adds in the year-ago quarter fueled by the COVID-19 pandemic, and off from the 379,000 adds in the pre-pandemic period of Q3 2019. Comcast ended the quarter with 31.68 million broadband subs, which accounted for 52.2% penetration of homes and businesses passed. Broadband revenues climbed 11.6%, to $5.8 billion.

On today’s earnings call, CEO Brian Roberts made no apologies.  He said:

“Our Cable division continues to be a standout delivering over 7% revenue growth and the fifth consecutive quarter of double-digit EBITDA growth of 10%, fueled by our broadband business, which generated 300,000 net additions and contributed to a very healthy 255,000 net new customer relationships. Business services has emerged from the pandemic and was also a key driver of our results and we believe this momentum will continue.”

“Our success comes from our network advantage, innovative products and world-class operational capabilities, which enable us to provide an unparalleled experience. Just like in residential, we are proactively responding to the needs of our commercial customers and offering personalized solutions.”

Dave Watson, CEO of Comcast’s cable unit, attributed the broadband slowdown to a decrease in overall new connects across the company’s footprint, creating fewer opportunities for “jump balls” against broadband competitors. “However, broadband subscriber churn remains at historic lows certainly for quarter three,” he said.  Watson added full year 2021 net additions are expected to come in around 2019 levels. Comcast had 1.4 million broadband net additions in 2019 and thus far in 2021 has added 1.115 million, meaning it would need to add 285,000 broadband subscribers in Q4 to hit its target.

“We haven’t changed our view on the long-term trajectory of the connectivity business,” Watson said on today’s earnings call, noting that Comcast has added 1.1 million broadband subs through the first three quarters of 2021. “I’m just as confident and optimistic in the prospects in this business as I’ve ever been … The runway [for broadband subscriber growth] is still absolutely there.”

Capital expenditures for the Cable division fell 5.4% in the quarter to $1.7 billion, as an uptick in spending on line extensions and scalable infrastructure failed to fully offset decreased investment in customer premise equipment.

3rd Quarter 2021 Highlights:

  • Consolidated Adjusted EBITDA Increased 18.1% to $9.0 Billion; Adjusted EPS Increased 33.8% to $0.87; Generated Free Cash Flow of $3.2 Billion
  • Returned $2.7 Billion to Shareholders Through a Combination of $1.5 Billion in Share Repurchases and $1.2 Billion in Dividend Payments
  • Cable Communications Total Customer Relationship Net Additions Were 255,000; Total Broadband Customer Net Additions Were 300,000
  • Cable Communications Adjusted EBITDA Increased 10.3% and Adjusted EBITDA per Customer Relationship Increased 5.3%
  • Cable Communications Wireless Customer Line Net Additions Were 285,000, the Best Quarterly Result Since Launch in 2017
  • NBCUniversal Adjusted EBITDA Increased 48.2% to $1.3 Billion, Including Peacock Losses
  • Theme Parks Delivered Its Most Profitable Quarter Since the First Quarter of 2020, Driven by Universal Orlando; Celebrated the Grand Opening of Universal Beijing Resort on September 20th
  • Sky Adjusted EBITDA Increased 88.8% to $971 Million; On a Constant Currency Basis, Adjusted EBITDA Increased 76.2%

Business services did very well, as revenues there rose 8.7%, to $2.2 billion. Comcast Business added about 18,000 new customers in Q3, and has added 72,000 business customers over the past year.  “Business services have emerged from the pandemic,” Roberts said.

Roberts said the midsized and enterprise segments remain “underpenetrated” categories for Comcast Business. But they also represent areas the company will pursue more aggressively following the recent acquisition of SD-WAN and cloud platform specialist Masergy. Roberts added:

“While small business has led our growth for the last decade. We are still significantly underpenetrated in the mid-market and enterprise segments. We see a lot of potential to take share in our large addressable market, which just got even bigger post our recent acquisition of Masergy, which builds on our strong offering of technology solutions. Masergy has become a leading provider to companies worldwide and unlocks a customer segment that we don’t have today, particularly US-based organizations with multi-site global operations.”

Mobility is now rapidly becoming a major part of the Comcast story, while the company continues to lose pay video subscribers.  Xfinity Mobile (MVNO from Verizon Wireless) reached a quarterly record of 285,000 net new subscribers in the third quarter.

  • Roberts noted that Xfinity Mobile has achieved a penetration of about 6% of the company’s broadband base of nearly 32 million.
  • Watson said Comcast will continue to tie mobile to its core broadband product, but expects Xfinity Mobile to pick up the pace.  “We haven’t changed the strategic imperative behind mobile. But most certainly things have accelerated. Our goal … is to go faster, and to leverage mobile completely in everything that we do.”

Analyst Craig Moffett wrote in a note to clients (we highly recommend his service):

Q3 saw Comcast report a positive EBITDA contribution from Mobility for the third straight
quarter, with a swing of more than $100M from the $50M loss a year ago (Exhibit 3).
That Comcast has been able to achieve profitability even before meaningful traffic offload onto CBRS (likely still at least a year away) is significant in a number of ways. Yes, some additional EBITDA is always nice, particularly when compared to the losses of a year and two years ago. But more importantly, Comcast’s profitability demonstrates that they have the headroom to use wireless to defend broadband from incursions from TelCo fiber overbuilds, as we argued in Convergence Apocalypse? – October 14, 2021… and still contribute to overall profitability.