Comcast’s co-CEO says wireless is becoming a more meaningful growth engine
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Here are other stories on Comcast:
- Comcast Business Q2 growth fueled by enterprises’ complex service needs
- Comcast’s Cavanaugh says wireless is a lever in its convergence strategy
- Comcast Business balances SMB challenges by pursuing mid-size and large business growth
- Comcast Business’s Q3 revenues rise to $2.6B amidst fixed wireless access (FWA) competition
Comcast is seeing the fruits of its labor to shake up the wireless business continue to pay off as its customer base rises, crossing the 10 million mark in the second quarter.
But having only penetrated 7% of the total addressable lines in its footprint, it sees plenty of room for wireless growth ahead.
The service provider has established an MVNO agreement for residential and, more recently, with T-Mobile for business customers. In all, Comcast has 65 million converged passings that enable 1 Gbps-plus speeds as well as a mobile service.
Michael Cavanagh, Comcast co-CEO, told investors during its second-quarter earnings call: “Wireless is becoming a more meaningful growth engine for us.”
“We just had our best quarter ever with 448,000 net line additions, our second consecutive record quarter, supported by stronger gross additions and improved churn even as the initial cohort of free lines began rolling into the paid base,” he said. “Year-to-date, net line additions are up 25%, and importantly, we are seeing positive early traction converting those free lines into paid wireless relationships, which reinforces the value customers are seeing in our products and which will support better monetization as we move through the year.”
Convergence ups and downs
As Comcast scales its wireless base, it continues to advance its convergence vision.
However, the cable MSO saw some challenges in the second quarter as convergence revenue declined 3.2%, and convergence ARPA declined 1.5%, reflecting the pressure on broadband revenue, partially offset by 14% growth in wireless service revenue.
Roughly half of Comcast’s residential postpaid phone wireless subscriber additions in the second quarter came from customers taking a free line.
“We are actively leaning into this opportunity,” said Jason Armstrong, Comcast's CFO. “The free line offer is doing what we intended: it's building awareness, it's driving attachment, and it’s expanding the base of customers we can convert into paying wireless relationships over time.”
Comcast is seeing its wireless product resonate with two main segments: value-oriented segments with savings over competitors and the higher-value market segment.
Armstrong noted that Comcast is seeing a growing number of its customers purchase higher-tier unlimited plans.
“Premium unlimited plans accounted for roughly 30% of postpaid phone connects, demonstrating that we are now competing very effectively in a segment of the market that carries higher expectations around network quality and data allotments, as well as handset availability and refreshment,” he said. “We ended the quarter with 10.2 million total lines, representing 17% penetration of our domestic residential broadband customer base, but only 7% penetration of the total wireless line opportunity in our footprint.”
As free wireless line customers reach the monetization stage, Comcast is managing those customers with a lifecycle approach focused on usage, engagement, retention, and the overall product experience.
Thus far, the service provider said the transition from free to paid subscriptions is performing well.
“Early free line conversion cohorts are tracking in line with our expectations, and we continue to expect a significant majority of these customers to convert to paid relationships as roll-offs accelerate in the second half of the year,” Armstrong said. “Over time, that should provide a real tailwind to convergence revenue and ARPA growth.”
Still, the near-term reality is that the adoption of free wireless lines dilutes broadband ARPU. Second-quarter broadband ARPU declined 3.8%.
Also, Comcast’s investment in customer experience and go-to-market capabilities drove a 5.8% decline in Connectivity and Platforms EBITDA.
Armstrong said that “these results are consistent with our remarks on last quarter's earnings call, where we previewed incremental pressure on both ARPU and EBITDA growth.”
While broadband remains the anchor product in Comcast’s residential arsenal, the value of the relationship expands further when it adds wireless.
“At roughly $85, our convergence ARPA remains well below levels reported by telecom competitors, which highlights the long runway and opportunity we have ahead of us, particularly as we stabilize broadband and continue to scale wireless,” Armstrong said.
“We ended the quarter with 10.2 million total lines, representing 17% penetration of our domestic residential broadband customer base, but only 7% penetration of the total wireless line opportunity in our footprint.”--Jason Armstrong, CFO of Comcast.
Narrowing broadband losses
As seen in earlier quarters, Comcast shed broadband customers.
However, in the second quarter it narrowed those losses by 34,000 year-over-year to a loss of 167,000.
“This improvement reflects continued traction from our new go-to-market strategy even as we continue to operate in a highly competitive environment across our footprint,” Armstrong said. “We expect to see modest improvement as we anniversary the launch of the go-to-market strategy and as free wireless lines begin converting into paid relationships in greater volume as we exit this year.”
Comcast will continue to be challenged by the fact that it not only faces competitive threats from fiber, fixed wireless access (FWA), and satellite as another alternative, but also that convergence-based activity is growing throughout the broadband industry.
The service provider has taken various steps to enhance the customer experience, including simplifying pricing, improving transparency, streamlining the customer experience, investing in our best-in-class network and products, and leaning further into wireless, including its free wireless offer.
“We are operating under the assumption that the market will remain intensely competitive,” Armstrong said. “Against that backdrop, at the end of the second quarter of last year, we made a deliberate shift in how we go-to-market to compete more effectively in a competitive environment increasingly defined by convergence.”
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Sean Buckley
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