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Comcast won't sweat video customer losses with business services, smart home growth ahead

Comcast’s fourth quarter earnings report and follow-up conference call highlight how the cable giant is laying out a blue print that can generate profitable growth even as it loses video customers.

Here’s a key quote from CEO Brian Roberts (my emphasis added):

During 2017, we continued to direct more of our strategic focus toward our connectivity business, which collectively generated over $20 billion in revenues and grew 10%. This includes broadband, where we added 1.2 million net new customers. We continue to differentiate in broadband with the deployment of DOCSIS 3.1, enabling gigabit speeds in our footprint, and our new xFi platform, which gives customers more control of their in-home Wi-Fi experience. Business services exited the year and a $6.5 billion revenue run rate.

The key word in Roberts quote is connectivity. The components of that connectivity theme mean that Comcast isn’t going to get into a race into the bottom for video customers. The game plan for Comcast is to grow its other businesses.

Comcast: How AI, machine learning, DevOps, and a bit of hardware may make it a smart home platform | Comcast launches xFi Advanced Gateway, aims for speedy Wi-Fi, IoT integration | Comcast brings home automation platform to 15M Xfinity customers | Comcast: How customer experience drives product development

Comcast has worked to hone its software and platform strategy to be an aggregator of aggregators on the video side, use its broadband pipes to sell smart home and security services and develop a thriving business services unit.

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The company lost 33,000 video customers in the fourth quarter. Yes, over-the-top content consumption is a real trend. But these cable cord cutters still need a broadband pipe from somewhere–unless 5G arrives in the next few minutes.

Focusing on video customer losses when talking about Comcast may miss the bigger picture. Overall, Comcast reported fourth quarter net income of $15 billion, or $3.17 a share, on revenue of $21.92 billion. Earnings were boosted by tax law changes. Excluding tax gains, Comcast reported fourth quarter earnings of 49 cents a share, two pennies better than estimates.

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Comcast’s tax windfall will be used to boost dividends and share buybacks.

CNET


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Some key points to ponder:

  • Roberts said Comcast’s wireless service added 380,000 lines after just a few months on the market. This wireless play serves as an extension to a connectivity bundle.
  • Comcast added 350,000 high speed Internet customers in the fourth quarter.
  • Business services is driving cable results as Comcast added 33,000 enterprises and revenue of $1.6 billion, up 12 percent from a year ago. Comcast added 135,000 business customers for 2017.
  • Comcast’s X1 platform is deployed to nearly 60 percent of the company’s video base. That X1 platform, along with XFi, serves as the gateway to smart home services. Roberts noted:

I feel really good about the roadmap. We launched a mobile product for our broadband customers. We’re really excited about that. We talked about the speed and Pods and connectivity in coverage. Then you’ve got smart home. You look at CES, everything at CES is all about what’s going to happen to the home of the future the next three years, five years, 10 years. It’s hard to know exactly when any of those items will explode. You look at our bit per home consumption rate, and that is up again, even more this year. So that’s why we like the business so much. And ultimately you boil it all down to that. We’d love all those bits to be our bits, but that doesn’t matter. We want to give customers an incredible experience. We want to be the best, and that requires investment in innovation.

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