- Charter and Comcast lost a combined 269,000 broadband subs in Q2, but the full impact from the end of the Affordable Connectivity Program remains to be seen
- Progress on broadband buildouts were a bright spot for both operators
- Charter doesn’t seem too worried about open access networks moving into its footprint
When it comes to cable earnings, the outlook hasn’t been exactly optimistic. Cable broadband “may decline for the foreseeable future,” Wolfe Research recently predicted, as valuation multiples for Charter and Comcast “near all-time lows.”
Charter and Comcast lost 149,000 and 120,000 broadband subscribers, respectively, in the second quarter. They fared better than analysts expected, however rough patches may still lie ahead due to the end of the Affordable Connectivity Program (ACP).
Charter
Charter estimates the ACP’s expiration drove “over 100,000” of the 149,000 customers it lost, said CFO Jessica Fischer on the earnings call. New Street Research meanwhile had predicted Charter would lose around 209,000 internet subscribers in the quarter.
Charter earlier this year disclosed it had just over 5 million households enrolled in ACP. Given Charter’s ACP base was “almost 4x bigger” than Comcast’s, it “undoubtedly” saw a larger impact from ACP going away, said New Street analysts.
The company is offering its ACP customers a lifeline through mobile. Charter subscribers losing their ACP benefit can get a free mobile line for one year. But that move “may have weighed on broadband ARPU,” which missed New Street estimates.
On the deployment side, Charter is expanding its footprint with “high ROI construction opportunities” in both rural and non-rural areas, said CEO Chris Winfrey.
Charter in the quarter added 89,000 subsidized rural passings as well as 36,000 net subscribers in rural markets. The operator remains optimistic it can complete its Rural Digital Opportunity Fund (RDOF) build by the end of 2026 – “two years ahead of schedule,” Fischer noted.
In terms of competition, cable’s got the usual suspects: fiber and fixed wireless access (FWA). Wholesale open access networks, such as AT&T’s Gigapower, are also picking up steam.
How’s Charter thinking about open access providers moving into its footprint? In short, it doesn’t seem too worried.
“It’s still a fiber overbuild at the end of the day,” Winfrey said, while noting these wholesale networks make up “just a very small percentage of the U.S. footprint.”
Regarding some of the fiber joint ventures that have been announced, “if you really sit back and think about it from both a strategy and valuation perspective, I think it’s flattering,” Winfrey stated. “It tells you the strategic asset that we have.”
Charter’s consolidated revenue of $13.7 billion increased just by 0.2% year-over-year. Net income totaled $1.23 billion in Q2.
Comcast
Comcast chalked up its subscriber losses to an “intensely competitive” broadband environment, said CFO Jason Armstrong. Residential broadband losses of 110,000 were “better than expected,” according to New Street.
“We suspect it stems from a lower-than-expected impact from ACP,” said the analysts.
Although ACP didn’t hit Comcast as hard as it did Charter in Q2, execs are on the lookout for a future impact.
“Looking ahead, we expect the bulk of our ACP-related subscriber activity to happen in the third quarter, including losses associated with non-pay churn,” said Comcast CFO Jason Armstrong on the earnings call, but added “it’s too early to assess the full impact.”
It largely depends on how long it takes operators to process non-pay churn, as it can take “75-90 days from the bill date for these customers to be counted as churn,” said New Street analysts.
Comcast recently beefed up its low-cost internet options. In April, the company debuted a suite of NOW prepaid products, including a plan for fixed broadband – something that hasn’t been widely offered in the industry.
“While we are pleased with our enhancement to our offerings for the price-conscious segment, the reality is that the vast majority of our customer base subscribes to more premium products,” said Comcast President Mike Cavanagh.
Edward Jones analyst David Heger said he thinks Comcast “will still be competitive in internet services” as it upgrades broadband speeds across its footprint. However, the company “faces tough competition from fixed wireless services.”
Like Charter, Comcast feels it’s on track with its broadband expansion. Comcast in the last year added 1.2 million new homes passed, said Comcast CEO Brian Roberts, touting that number is “the most in the company’s history.”
Asked whether Comcast will invest more capital in the Broadband Equity, Access and Deployment (BEAD) program, Comcast Cable CEO Dave Watson didn’t share too much about the company’s plans but said Comcast is looking at BEAD on a “state-by-state basis.”
“We’re optimistic in a lot of cases, but we’ll have to look for the guidelines and the specifics tied to it,” Watson said.
Consolidated revenue of $29.7 billion declined 2.7% from $30.5 billion in Q2 2023, while net income was $3.93 billion.
