In a notable shift, cable companies are increasingly looking towards mobile services as a promising avenue for growth.
Traditionally seen as a supplementary feature for retaining broadband customers, the wireless segment has evolved into a significant revenue source for major cable operators like Comcast and Charter Communications. With less than ten years since they entered the mobile market, these corporations are now prioritizing wireless services as a crucial area for expansion.
“It’s not only a play for additional broadband customers, it’s a product that generates financial returns on its own, and where we continue to see significant growth,” stated Charter Communications Chief Financial Officer Jessica Fischer in a recent discussion.
Historically recognized for their pay-TV bundles and landline services, cable firms have diversified, emerging as key players in the home internet and mobile sectors. Comcast brands its offerings under Xfinity, while Charter operates under the Spectrum name.
Both giants, alongside smaller competitors like Altice USA, have recorded steady growth in their mobile customer bases. Data from MoffettNathanson reveals that nearly 50% of all new wireless line additions last year were attributed to cable operators.
This success contrasts sharply with the stagnation witnessed in cable’s broadband sector, which has suffered from sluggish customer growth and losses, subsequently affecting stock valuations. Cable executives have attributed this trend to heightened competition, leaving the future uncertain. In response, Charter has tailored its product offerings to include mobile, with Comcast poised to adopt similar strategies.
The appeal of cable’s mobile services is partly due to significantly lower costs, with savings sometimes reaching hundreds of dollars annually compared to conventional wireless plans.
However, the uptick in mobile subscribers has yet to be reflected in stock prices for these companies.
Industry analysts, including those from Finance Newso, indicate that investors remain focused on broadband developments, often overlooking the advancements in mobile.
Media analyst Craig Moffett, co-founder of MoffettNathanson, drew parallels between the current situation and the period from 2009 to 2010 when investors fixated on the decline of pay-TV, which was once deemed cable’s primary business, neglecting the growth in broadband.
“The current challenges facing broadband are nowhere near as severe as those that confronted pay-TV,” Moffett remarked. “While broadband faces competition, it is not facing an existential threat.” He emphasized that the mobile sector has tremendous potential, being nearly twice the size of the broadband market.
“There’s much more to gain, and much less to lose,” he added.
Comcast Chief Financial Officer Jason Armstrong emphasized their growth prospects during an earnings call in January, stating, “While we dominate the $80 billion U.S. residential broadband sector, we are a challenger in the much larger $200 billion U.S. wireless market. Wireless is an essential component of our broadband strategy.”
Both Comcast and Charter are set to announce their first-quarter earnings this week.
Dialing up
The mobile segment has flourished for cable companies, having emerged less than a decade ago.
Charter’s Spectrum Mobile lines surged from 1.08 million in late 2019 to 9.88 million by the end of 2024. During the same timeframe, Comcast’s Xfinity Mobile lines rose from 2.05 million to 7.83 million, while Altice boosted its Optimum Mobile subscriber count from 69,000 to nearly 460,000.
This growth, while noteworthy, still pales in comparison to industry giants Verizon, AT&T and T-Mobile, each boasting over 100 million wireless subscribers. These rivals are also venturing into the broadband domain with options such as fiber and 5G internet, with Verizon recently highlighting its success in home internet growth.
In contrast, cable operators have collectively seen a decline of over 1 million internet customers and 8.7 million cable customers within the past three years.
Last year, Charter introduced a series of strategic changes, including competitive pricing and bundled packages that incorporate mobile offerings. Earlier this year, Comcast indicated plans to adopt similar tactics to further expand its mobile business.
“We will prioritize wireless services more than ever,” Comcast President Mike Cavanagh confirmed during January’s investor earnings call.
This week, Comcast launched a new premium Xfinity Mobile plan aimed at attracting a broader customer base. Additionally, the company recently appointed Jon Gieselman as chief growth officer, who will focus on enhancing its residential Xfinity offerings.
For both Charter and Comcast, new mobile customers primarily originate from their existing subscriber base rather than external sources.
Customers utilising Altice USA’s Optimum mobile service in conjunction with broadband and cable TV are over 20% less likely to cancel their subscriptions, according to Michael Parker, president of consumer services at Optimum.
An Optimum-commissioned survey recently showcased the bundling potential for cable providers, revealing that approximately 25% of Americans are inclined to subscribe to a bundled service within the next year, and 80% believe that bundled internet and mobile services are more economical than separate purchases.
Unlike most other service providers who require customers to subscribe to additional services to access mobile, Altice offers its mobile plans to anyone within its range.
Altice has set an ambitious target of reaching 1 million mobile customers by the end of 2027.
Initially, mobile services were not designed to drive significant business growth, but the market has quickly proven that they can stand alone successfully, Parker noted.
Going mainstream
The mobile sector and other segments of the cable business are interrelated.
The more lucrative broadband service helps subsidize mobile, which by itself might struggle to draw customers, according to KeyBanc Capital Markets analyst Brandon Nispel. Conversely, bundles that include mobile offerings can attract both existing and potential broadband subscribers.
Cable operators face a unique challenge in promoting their mobile services due to limited brand recognition outside their core markets.
The brands are often more recognized within their service areas, presenting a somewhat isolated potential customer base. However, marketing efforts for mobile services are reportedly yielding positive results, especially as uptake begins to rise.
Altice experienced a remarkable 42.6% growth in mobile lines year over year by the fourth quarter, a feat that Parker attributes to enhancements in product offerings and marketing strategies.
Rich DiGeronimo, Charter’s president of product and technology, noted an increase in recognition for the Spectrum Mobile brand, stating, “I think our brand awareness is now established. We’re much more mainstream than we were before.”
Much of the success in marketing can be attributed to competitive pricing.
Cable companies can offer significantly cheaper rates thanks to agreements allowing them to utilize existing wireless networks.
While Charter and Comcast rely on Verizon’s network, Altice has partnered with T-Mobile, allowing them to offer mobile plans at lower prices than traditional providers.
Executives emphasize that a substantial amount of customer usage occurs over Wi-Fi rather than the wireless network, supporting the profitability of this segment.
Comcast’s Armstrong stated, “Wireless for us is a profitable business, largely due to our advantageous customer acquisition costs and our capacity to offload traffic onto Wi-Fi.”
For traditional wireless firms, losing customers to cable competitors comes with the benefit of still utilizing their networks, ensuring continued revenue from cable operators. Industry leaders remain unconcerned about this trend, citing the difficulties in transferring customers away from established wireless plans.
Verizon CFO Tony Skiadas acknowledged the competition but emphasized that regardless of the pricing strategies of cable operators, they would still be required to compensate Verizon for network use. “We are prepared to compete based on the strengths of our product offerings,” he remarked.
AT&T CEO John Stankey commented that cable companies are on the defensive regarding competition with AT&T’s broadband services, which he believes offer superior quality and pricing structures compared to cable.
“Kudos to them for their successes, but I’m aiming for AT&T to lead this next decade,” he concluded.
Disclosure: Comcast owns NBCUniversal, the parent company of Finance Newso.
