Comcast Corp. delivered strong fourth-quarter and full-year 2016 earnings on Thursday from its cable operations and NBCUniversal division. But the focus of Wall Street analysts on the company’s conference call was the cable giant’s plan to add wireless service to its bundled offering.
Comcast has a pact with telco giant Verizon that will allow the Philadelphia-based cable giant to offer wireless phone and data services to subscriber base. Comcast chief Brian Roberts said during the call that the wireless offering will begin to roll out in the first half of this year, but would not elaborate on details such as specific timing and where the service will launch in Comcast’s footprint.
The focus on Comcast’s wireless ambitions came on the same day the Wall Street Journal reported that Verizon has made a preliminary approach to Comcast’s cable rival Charter Communications about a potential merger. The prospects of marrying wired video and high-speed data providers with telcos such as Verizon and Sprint has become a speculative focus for media M&A in the past few weeks.
The new Trump administration is expected to bring a lighter regulatory touch along with its pro-business agenda. However, the media-centric nature of such deals could spark resistance in Washington, given Trump’s adversarial relationship with mainstream news orgs and the populist fervor driving skepticism of Big Media. AT&T is already sweating out the potential for the new regime in Washington to throw up roadblocks to its pending $85.4 billion merger with Time Warner.
For now, Comcast has an established agreement with Verizon to piggyback on the telco giant’s wireless network as needed to provide service to its customers that sign up for wireless service.
“We’re excited to get it launched,” Robert said. “We believe we’ll learn a lot as we go.”
Roberts was pressed on the cost of that launch and how Comcast will compete in the crowded market. Roberts said it’s all about the bundle, allowing Comcast to offer the “quad play” offering of video, high-speed Internet, telephone, and wireless service that is becoming a staple for MVPDs in other countries.
“The goal of the business is to have better bundling with some of our customers who want to save some of their bill and get a world-class product and take a bundle and have lower churn,” Roberts said. “If you can achieve that, we’ll see the economics really work. That’s the goal. The only way to find out is to get started.”
Roberts was also questioned about his view of the broader regulatory environment now in the Trump era. Roberts said he was “encouraged” by the prospect of changes in the mindset at the FCC and for corporate business tax reform. In 2015, Comcast’s bid to buy Time Warner Cable was doomed amid the outcry over the concentration of broadband market share.
“We’re encouraged by the prospect of rules that we believe will encourage that investment, stimulate investment, whether that’s tax decreases or revisiting the authority of the government to go to places that they said they weren’t going to, but legally they could go to in the Open Internet order with Title II,” Robert said. “We’re looking forward to working with the new administration and the new regulatory leaders to try to frame something that’s good for consumers and give us a stable platform that we can invest (in).”
Other highlights from the call:
- Comcast’s net gain of 160,000 video subscribers for 2016, after a loss of 36,000, marked its best showing in 10 years.
- Comcast warned that programming costs for the cable systems will see a 13% growth rate in 2017 because of renewal deals with programmers, but will settle down to single-digit growth the following year. At the same time, NBC will bank double-digit growth in distribution fees, with retransmission consent coin rising to $1.4 billion.
- The strong box office performance of Universal’s “Sing” and “The Secret Life of Pets” helped offset the tough comps for the film studio against its blockbuster 2015 slate.
- NBCUniversal CEO Steve Burke made a cautious prediction of strong 2017 upfront sales, given that the scatter market has yet to cool off. “All of the indications suggest to me we have a good shot of having a very strong upfront nationally,” he said.
- The Universal Studios theme parks are poised for a big year with the opening of the Volcano Bay water park and the Jimmy Fallon-themed “Race Through New York” attraction in Orlando and a “Despicable Me”-themed ride in Japan. “It’s all green lights as far as I can see in the theme park business,” Burke said.
(Pictured: Brian Roberts)