Cable giants Charter and Comcast reported considerably different broadband results for the third quarter late last week.
As financial analysts at MoffettNathanson put it in a research note about Charter’s earnings, “Every unit metric in Charter’s report is strong, and more to the point, much stronger than Comcast’s. Every financial metric in Comcast’s report was strong and, again to the point, much stronger than Charter’s.”
While Charter gained 63,000 broadband subscribers, Comcast lost 18,000.
MoffettNathanson attributes Charter’s stronger performance, at least in part, to the company’s expansion into rural areas. The cableco added 31,000 new customer relationships in their rural edge-out markets in third quarter.
In a research note about Comcast’s earnings, though, the analysts note that Comcast is likely to become more aggressive with its rural buildouts if it wins BEAD funding in some states.
The analysts also caution that in order to generate strong subscriber growth, Charter is offering deep price discounts. The company’s Spectrum One offering – a bundle of broadband and wireless – is selling at a low 12-month introductory price.
Per previous Telecompetitor coverage, the introductory price for Spectrum One is $50 for 300 Mbps service. Purchased separately, the same offering would cost $85.
Charter faces a reckoning in the fourth quarter, when the introductory pricing for Spectrum One ends and some customers cancel service when the price goes up. The question is how many will do that?
Meanwhile, by not offering deep discounts, Comcast has seen strong growth in broadband ARPU (average revenue per user) – considerably stronger in comparison with Charter, the analysts note.
The MoffettNathanson analysts succinctly sum up each company’s strategy and challenges.
“Faster unit growth and slower pricing growth is, in Charter’s view, far preferable to the opposite. Pricing power that remains unused isn’t lost, it is simply held in reserve. Lower ARPU also makes the business less vulnerable both to competition and to regulation. . . Bears will argue that Charter’s unit growth is only possible because they aren’t taking price, and that ARPU increases won’t ever be possible. With Spectrum One pricing beginning to roll off for the first cohort acquired last year, we’ll find out soon enough.”
As for Comcast, the analysts said, “Comcast isn’t wrong to argue that low-end broadband subscribers and highly incentivized wireless lines don’t generate much value and may not last very long. . . The debate coming out of the quarter will be whether Comcast is playing it too safe.”
