Comcast's wireless play could threaten Verizon, AT&T: analysts

Comcast Xfinity Mobile
Analysts say Comcast could eventually threaten legacy wireless carriers.

Analysts generally agree that Comcast’s Xfinity Mobile isn’t likely to lure many customers from legacy wireless carriers right out of the gate. If the cable company executes well, though, it could emerge as a real threat over the next few years.

The second-largest multisystem operator in the U.S. obviously brings some powerful weapons to bear as it enters the wireless market, but its first step is a decidedly modest one designed to minimize churn of its existing customer base rather than winning huge numbers of mobile users. The service will be limited to Comcast’s current footprint, which excludes major markets such as Los Angeles and New York—as T-Mobile CEO John Legere mockingly pointed out via Twitter—and its most attractive wireless plan will be available to its best X1 customers, which account for only 25% of the X1 base.

The wireless service will also face technical challenges, such as the fact that it won’t support handoffs between Wi-Fi and cellular connections, at least initially. Other limitations include mandatory autopay, an inability to activate users’ existing handsets at launch, and a retail footprint that pales in comparison to the brick-and-mortar presence of major wireless carriers.

Some customers are sure to find Xfinity Mobile’s price plans attractive, however. Users with Comcast’s most expensive internet and TV bundles can add so-called unlimited wireless data for $45 a month; other customers will pay $65 a month. Mobile data will also be offered at $12 per GB.

“Relative to peers, the $45/line offering is competitive with AT&T and Verizon for both single and multiline plans ($180 for four lines), though, not surprisingly, above both Sprint and T-Mobile,” Mike McCormack of Jefferies wrote in a research note. “The $65/line plans appear less competitive when moving beyond two lines. For consumers with limited data usage, there is also a metered pricing option for $12/GB with the option to switch to unlimited without penalty. Unlike peers, families can mix and match between unlimited and metered pricing.”

Limitations notwithstanding, Comcast’s much-anticipated entry will add gas to a market that’s already aflame with competition. All four tier-one carriers have made major pushes with unlimited data offerings in recent months, and the battle has escalated as they’ve lowered prices for those plans and added perks such as HD video and support for mobile hotspot service.

Rather than joining the market with a full-on assault, Comcast appears to be starting to lay the foundation for a viable mobile business just ahead of the emergence of 5G services.

“Execution on Comcast’s part will be a key factor as to the size and scope of the impact on wireless carriers,” Kannan Venkateshwar of Barclays wrote. “That being said, we believe that Comcast is incentivized to pursue higher value customers with bundled packages, leading us to expect higher pressure on carriers that have a higher mix in those markets (i.e., likely AT&T and Verizon). In contrast, lower pricing points have been a clear focus of T-Mobile and Sprint’s strategies, and therefore we could see less pressure given the composite of the subscriber base.

“In our opinion, 2018 and 2019 could be the years where the company really starts ramping up its scale and therefore operating leverage from the mobile business is likely to show up over time.”