Slowing Broadband Raises Comcast Red Flags; Further Expanded Footprint Afoot

Comcast is facing growing broadband competition, particularly from fixed wireless and fiber providers, though its churn is at record lows, Comcast Cable CEO David Watson said Thursday, announcing Q1 results. He said its response includes various broadband tiers of service and its increasing convergence of its broadband and mobile services packaging and marketing. The company will do field trials of its first 5G radios as a means for offloading traffic in high-load areas in Q2, he said. Comcast stock closed at $41.70, down 6.2%, in response to what analysts said were soft results.

The company ended Q1 with 29.84 million residential broadband subscribers, up 1.1 million year over year; 4.3 million wireless lines, up 1.2 million; 17 million residential video customers, down 1.6 million; and 8.8 million residential voice customers, down 700,000. Revenue for the quarter was $31 billion, 14% higher year over year.

"Not a good trend," LightShed's Rich Greenfield tweeted about the past quarters of broadband growth at Comcast, each consecutively lower than the previous one. Telecom measurement firm Tefficent tweeted that Comcast's broadband net adds were seemingly hit by Verizon's and T-Mobile's fixed wireless access efforts. "The middling-but-better-than-expectations results from Comcast" and weak results from telcos "are likely an indication that industry growth has continued to decelerate" though potentially not as much as feared, MoffettNathanson analyst Craig Moffett wrote investors. "We’re in the post-COVID payback period. But we’ll probably also see that market share trends haven’t moved all that much."

Ending pandemic-era broadband connectivity programs at 2021's end helped boost the number of paid broadband subscribers in Q1, Chief Financial Officer Michael Cavanagh said. Some customers in those COVID-19 programs received free service, he said. About a third of Q1's net broadband subscriber additions were those customers opting for paid subscriptions, he said. Comcast doesn't expect further translation of those subs into paid subscriptions, he said. Comcast grew its footprint by more than 800,000 passings in 2021 and "at minimum, we are going to shoot for that again," CEO Brian Roberts said. He said it's evaluating various federal and state subsidy programs for rural edgeouts of its network footprint "and submitted a lot of applications" where those subsidies look like an economical way to serve such areas.

Peacock's paid subscribership leaped 40% in Q1, adding 4 million, as the company increasingly is looking to the streaming service as part of its long-term video growth, Roberts said. The Winter Olympics, Super Bowl and original content drove Peacock's growth, Roberts said. He said more modest subscriber gains are expected in Q2, but the back half of the year also could be a springboard with content including the World Cup and Sunday Night Football. NBCUniversal CEO Jeff Shell said NBC's next-day programming, currently available on Hulu, will move to Peacock starting in September. Peacock is being treated in advertising sales and programming as an extension of its existing TV business, rather than a separate business, Shell said. He said Comcast is focusing on Sky markets for international distribution of Peacock, and trying to use partnerships for non-Sky markets.

Rising inflation's overall impact on Comcast "has been limited," Cavanagh said. Energy costs are about 1% of its operating expenses, he said, noting about 95% of its debt is on fixed rates. The company is "more than offsetting" wage and other expense pressures through operational efficiencies, he said.