Comcast said it added 316,000 wireless lines in the second quarter 2023, bringing its total wireless lines to 5.98 million. It also reported domestic wireless revenue of $869 million for the second quarter, representing 20.4% growth from the same quarter a year ago.
Comcast CFO Jason Armstrong said, “This marked the seventh consecutive quarter of more than 300,000 line additions. With just 10% of our domestic residential broadband customers taking our mobile offering, we have a big opportunity and long runway ahead for growth in wireless.”
Comcast’s mobile virtual network operator (MVNO) service is only offered to its broadband customers.
The company has repeatedly bragged that it has a very good wholesale wireless contract with Verizon. Earlier this week, Bank of America analyst David Barden asked Verizon executives whether their contract with Comcast was perhaps too good for Comcast.
The contract is considered perpetual because it was tied to the sale of some spectrum from cable companies to Verizon in 2011. Verizon also has similar MVNO agreements with Charter and Cox.
Barden asked if the contract was indeed perpetual or whether it could be (or had been) renegotiated to provide Verizon with more wholesale revenue.
Verizon CEO Hans Vestberg said this week that it was a complex area and he couldn’t talk about some of it because of non-disclosure agreements. “The only thing that I'm securing is that Verizon is making money on this. That, I can tell you. We build the network once. The more connections, the more usage, and the more revenue we have on it, the better return on capital it is.”
Analysts are keenly interested in the frenemy relationship between cable operators and Verizon because it’s a balancing act as to who’s benefiting the most, at any given time, in terms of subscribers and revenue.
Yesterday, MoffettNathanson analyst Craig Moffett asked Comcast executives a similar question as was asked to Verizon earlier this week. He asked whether the wholesale contract with Comcast was irrevocable and permanent.
David Watson, CEO of Comcast Cable, said, “We have a great MVNO….we have a perpetual access to all the services that we need from Verizon's network. So, it's just straightforward, that's the way it is.”
Armstrong added, “I can't speak to Verizon and their revenue trajectory. I know they have got a few different things in the wholesale revenue category beyond just cable. But I can speak to obviously the economics of our business. We are happy with it. We have a wholesale deal with Verizon to accommodate that traffic where there is outflows, but then, we are also trying to offload as much traffic as we can on our own network.”
New Street Research analyst Jonathan Chaplin wrote that “If cable did relinquish a perpetual pricing construct, they would have to have high confidence in a declining reliance on the Verizon network.”
That declining reliance could come from offloading more of their traffic onto their own Wi-Fi hotspots or by building out their own network infrastructure on CBRS spectrum.
Comcast’s wireless approach
Watson said Comcast consistently has promotions that sometimes involve handset subsidies. “It can be in the form of gift cards, can be outright promotions that are discounts, and in some cases, a free device, but it's not every day,” he said. “And we increasingly focus on higher-end mobile tiers, and we have a great slate there between by-the-gig, unlimited, and premium unlimited.”
He said Comcast’s core wireless pricing provides between 30% and 50% savings compared to the big wireless carriers. And the company is just getting started in targeting small businesses with wireless.
“We've got a strong position partnering mobile with broadband, got great Wi-Fi overlay, and a strong MVNO,” said Watson.