Comcast is conservatively looking at a long-term revenue opportunity of $7.5 billion a year from its new mobile service if penetration within its footprint matches that of its landline voice product.
So predicts Barclays analyst Kannan Venkateshwar, who published a somewhat bullish note to investors after Comcast finally unveiled Xfinity Mobile.
With 130 million wireless lines existing in its footprint, Comcast has access to nearly half the U.S. mobile market, “which provides years of growth,” Venkateshwar concludes.
“Assuming mid-single-digit penetration of the company’s HSD subs over the midterm, this could be a ~$1.8 billion revenue opportunity,” he added. “Over the long term, assuming a penetration rate consistent with the company wireline voice penetration, the company could see up to a ~$7.5 billion revenue opportunity. This could be conservative, in our opinion, given that the nature of wireless (more data-heavy) and voice are quite different.”
As the analyst noted, Comcast expects Xfinity Mobile to generate positive cash flow “assuming just low- to mid-single-digit penetration” of the MSO’s 29 million customer relationships.
Venkateshwar believes Xfinity Mobile has inherent promotional advantages as well.
Comcast is the fourth biggest spender on advertising in the U.S., with an annual budget of $3.5 billion. This trails AT&T ($3.9 billion), but Comcast will be able to efficiently hook promotion of Xfinity Mobile into its existing marketing for its bundles, which is targeted to a much more focused footprint.
Comcast also has the vertically integrated advantage of having NBCUniversal as a promotional resource, the analyst said.
Further, Venkateshwar dismisses the notion that Comcast’s 500 retail stores—which compares to 2,200 for AT&T and more than 1,600 for Verizon—is a distinct disadvantage, since Comcast is focused on a finite footprint.
Churn reduction will be another benefit to the MSO, Venkateshwar added.
“For instance, 50-60% of home security customers never had a Comcast product before and once they get it, they over-index on triple play,” he said. “Also, bundling is likely to help reduce churn across its products, something that has become more apparent with X1 (X1 home has 20% lower voluntary churn than other homes).”