Comcast added 261,000 wireless subscribers in the fourth quarter, its largest gain yet in a single quarter, and putting it past the 2 million subscriber mark in total wireless customers.
Comcast uses an MVNO agreement with Verizon to serve customers, as well as its own Wi-Fi infrastructure. Its role in wireless is growing at the same time wireless operators are using their 5G deployments to better compete for cable broadband customers from the likes of Comcast and Charter Communications, which also operates as an MVNO.
In the fourth quarter, Comcast’s wireless net additions increased 15% year-over-year and reversed three consecutive quarters of year-over-year declines, noted LightShed analysts Walter Piecyk and Joe Galone. That was handily above their estimate of 225,000.
“Comcast also surpassed the critical 2.0 million subscriber milestone. Charter claims it can break-even at that level, but we estimate that Comcast will have to grow to 3.0 million subs to hit that next and very important milestone. Perhaps a new MVNO agreement could accelerate their path to profitability,” they wrote in a note for investors.
Comcast’s gains immediately trigger speculation about where they’re coming from. LightShed analysts believe that 45% of Comcast’s net additions are coming from Verizon and 25% from AT&T, based on testimony they heard during the Sprint/T-Mobile trial.
“T-Mobile pre-announced better than expected subscriber growth earlier this month, but it came with a rise in churn, its first y/y increase since Q1 of 2016. So it is possible that T-Mobile was also a larger share donor to Comcast this quarter,” they wrote. “T-Mobile acknowledged that the competitive landscape had increased in Q4, but it’s doubtful that many expected Comcast to be the one driving competition or that it would post these types of numbers.”
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Asked about its interest in acquiring spectrum—the 3.5 GHz CBRS and C-band auctions have attracted cable’s attention—Comcast didn’t show its cards, with management saying during a conference call with analysts that it will always be opportunistic about doing more with Wi-Fi and LTE and managing traffic between the two. But they emphasized they like the capital-light approach they’re taking.
Analysts have been questioning whether AT&T might offer a better MVNO deal for the cable companies, as it has signaled it’s open to talks with them. Comcast also didn’t address that directly but suggested it’s still early days for its wireless business.
Analysts at MoffettNathanson said they've long believed that Comcast’s current MVNO agreement with Verizon doesn’t leave room for the business to ever be profitable on its own.
“But it may not have to be. Reports that AT&T, and perhaps even T-Mobile, might be willing to offer a better deal suggest that Comcast’s steady wireless growth may have given it precisely the kind of strategic leverage that will now enable a much clearer path to profitability,” wrote analyst Craig Moffett in a report for investors.
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Noting mixed clues from Charter last year, Wells Fargo Securities analysts said they increasingly believe 2020 will be the year when the cable industry’s wireless strategy “rubber meets the road.” Given Comcast’s priorities—Peacock, Sky and others— they suggested Charter may the first to set down whatever wireless path they choose.
Charter, which has been active in FCC mid-band spectrum proceedings, reports its fourth-quarter results on January 31.