Comcast (NASDAQ: CMCSA) said it is now deploying 40,000 X1 video boxes a day, and that its X1 service now covers 25 percent of its footprint. The company also posted subscriber gains in its video and Internet services above what most Wall Street analysts had expected.
"Comcast, the largest pay-TV provider in the US, continues to exhibit operational excellence on the distribution side," noted analysts from Evercore.
As part of its third-quarter earnings announcement, Comcast credited X1 with significantly reducing its video subscriber churn. The analysts at MoffettNathanson said that Comcast's X1 is now deployed to roughly 5.6 million Americans. The MSO lost 48,000 video customers in the third quarter, its best subscriber performance in nine years and better than some analyst expectations. The company ended the quarter with 22.258 million video customers.
Indeed, the results were such that some analysts expect Comcast to eventually reverse the loss of its pay-TV customers. "We estimate that as Comcast deploys more residential X1 boxes, lower churn should ensue, eventually leading to positive video subscriber net additions," the analysts at Evercore said in a note to investors immediately after the release of Comcast's earnings.
Comcast also grew its high-speed Internet customer base by 320,000 subscribers, its best performance in six years and above the 300,000 quarterly subscriber gains that Wall Street had expected. The company ended the quarter with 22.868 million Internet customers -- up by more than 1 million from the 21.586 million it counted at the end of the year-ago quarter.
The analysts at Evercore said that Comcast's average revenue per basic customer was up 7 percent to $175.63, slightly above their expectations. And they said Comcast customers continue to choose service bundles: They pointed out that roughly 70 percent of Comcast's customers subscribe to two products, and fully 36 percent subscribe to three products.
"Getting people on the X1 platform is having an effect on churn," said Neil Smit, CEO of Comcast's cable division, speaking to investors during Comcast's third-quarter earnings call. Smit also said having more customers use TV Everywhere services -- around a third of Comcast's subscribers use its multiscreen services now -- is improving churn.
Comcast's results stirred positive reactions from Wall Street analysts: "Cable is now unmistakably taking share from satellite, and telco TV is fading fast. Some of that owes, no doubt, to cable's accelerating dominance in broadband. But some of it owes to fundamental changes in the way we are watching TV," said MoffettNathanson analyst Craig Moffett in a note to investors immediately following the release of Comcast's third-quarter earnings today. "Cable's two-way weigh architecture, and Comcast's best in class user interface and VOD libraries, are emerging as genuine sources of competitive advantage."
Concluded Moffett: "The longer-term trend is clear. Cable's improvement in basic video looks sustainable."
Indeed, Smit said that Comcast's $300 million investment in the "customer experience" is having an impact on reduced subscriber losses. "We're reducing phone calls and truck rolls and getting things right the first time," he said.
Overall, Comcast reported an 11.2 percent year-over-year increase in consolidated revenue growth to $18.7 billion, with TV programming, film and theme parks in its NBCUniversal division continuing their growth pace. The results just topped Wall Street's expectations.
In Comcast's cable business specifically, the company reported revenue rose 7 percent to $2.4 billion. The company said the figure was aided by an increase in its distribution revenue and advertising revenue, but pulled down by the introduction of NASCAR on its sports network, NBCSN, as well as "a 17.6% increase in content licensing and other revenue."
Comcast also raised its cable capital expense guidance to around 15 percent of its revenue, up from 14.5 percent previously, for the full year. For the third quarter specifically, Comcast said it is increasing its cable capex by $207 million, to around $1.9 billion, in order to support the deployment of its X1 platform and wireless gateways and to invest in its business services.
Not surprisingly, Comcast CEO Brian Roberts was asked about Comcast's wireless plans, eight days after Verizon (NYSE: VZ) confirmed that Comcast is acting on an option to purchase MVNO rights to its wireless network.
"We believe wireless is obviously an important area for the customer in the future and today, but we don't have any news," said Roberts, noting that it takes around six months to activate an MVNO deal.
He noted that Comcast has reached 11.7 million Wi-Fi hotspots. "We'll trial some things and look at some of the opportunities we have to take advantage of the successful investments we've made in Wi-Fi," Roberts added.
While NBCUniversal will likely participate in the FCC's upcoming spectrum auction by giving up spectrum to bidders, it's undecided if Comcast's cable unit will be there as a buyer, he added. Smit described the state of Comcast's fledgling wireless business as being in "listen and learn mode."
Smith was also coy when asked about Comcast's DOCSIS 3.1 deployment. "We have it in the labs, and we plan on rolling it out early next year. We think it will give us more speed."
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