Cable Broadband Slowdown to Continue in Q1 and Beyond, Analysts Say
See sluggishness lingering through first half of 2022
With Comcast expected to kick off the Q1 earnings season Thursday morning, analysts are expecting the broadband slowdown to continue throughout the year, with operators anticipated to report high-speed internet customer additions at about half the rate of last year.
Comcast is scheduled to report Q1 earnings on April 28 at 8:30 a.m., and Evercore ISI Group media analyst Vijay Jayant sees the nation’s largest cable operator reporting broadband additions of about 200,000 customers, or less than half the 423,000 they added in the same period last year. Other analysts, like Wells Fargo Securities' Steven Cahall and J.P. Morgan’s Phil Cusick, are in the same ballpark. Cusick expects Comcast to add about 180,000 broadband customers while Cahall predicts it will be a bit higher at 224,000 additions.
And they expect the sluggishness to continue throughout the first half of this year. Jayant is keeping his predictions consistent -- he expects Comcast to add another 200,000 broadband customers in Q2 -- but others see the slowdown getting even slower. Cusick predicts Comcast will add 155,000 broadband subscribers in Q2 and Cahall is in for 135,000 additions.
All three of the analysts predicted a slower first half, followed by a stronger second half of the year. For Comcast, Jayant was most consistent, estimating it would add 200,000 broadband customers in Q3, 225,000 in Q4, ending the year with 825,000 broadband additions, about 30% less than the 1.2 million it reported in 2021.
Cahall estimated that Comcast would end 2022 with 836,000 broadband additions -- 216,000 in Q3, 261,000 in Q4 -- while Cusick predicted Comcast would add 256,000 in Q3 and 230,000 in Q4 for a year end tally of 821,000 additions.
Charter Communications, which is scheduled to report Q1 earnings on April 29, led all cable operators during the pandemic with 2.2 million broadband additions in 2020, falling to 1.2 million total additions in 2021 and is expected to dip even more in 2022. For the quarter, Cahall is most optimistic, predicting 186,000 residential additions, followed by Cusick (180,000) and Jayant (175,000). For the full year, Jayant estimates that Charter will add 775,000 residential broadband customers (a 35% growth decline), while Cahall predicts 741,000 additions and Cusick 710,000 additions.
Lower move rates seem to be having the biggest overall impact on Charter (and Comcast for that matter), according to the analysts. Cusick noted that because Q1 is usually a seasonally better quarter, it is possible that Charter outperforms his estimates, but added he expected lower household completion and move rates to weigh on results. Jayant said the same for Comcast, adding that the low move churn environment creates “fewer ‘jump ball’ opportunities for gross adds.”
Altice USA, which began an aggressive acceleration of the buildout of its broadband network last year after reporting a 3,000-subscriber decline in high-speed internet customers for the full year, is expected to be flat or slightly down for Q1 and Q2 according to the analysts. The second half is expected to be better -- they predict Q3 additions to be between 10,000 and 16,0000, with Q4 even better at 10,000 to 22,000 more customers.
The slowdown in broadband additions has been widespread. Last week, telcos AT&T and Verizon reported 289,000 fiber additions and 294,000 broadband additions respectively. AT&T’s fiber net gain was erased by the loss of 307,000 U-verse and other advanced broadband subscribers and 17,000 digital subscriber line customers cut their ties to the company during the quarter. While wireline broadband performance was sluggish, telcos made up for it with big gains in fixed wireless -- Verizon added 194,000 FWA customers in the period, 2.5 times its additions in Q4 2021. T-Mobile said it added 338,000 fixed wireless customers in Q1, up from 224,000 additions in Q4 and 93,000 in Q1 2021.
Cahall sees the telcos, especially with fixed wireless, making an even bigger impact down the road. In a research note, Cahall wrote he expects cable broadband growth to slow to an average of 2.4% per year from 2020 to 2025 (down from 4.6% between 2017 and 2019), while fiber and fixed wireless is expected to average 12.3% and 19.6% annual growth, respectively, from 2020 to 2025. The result is that Cahall expects cable’s broadband market share to dip from 65% in 2020 to 63% in 2025, with fiber growing to 19% from 12% and fixed wireless to 11% from 5% in the same time frame.
“In short, the threat of fiber/fixed wireless is real, and its impact should only intensify as time advances,” Cahall wrote. ■
The smarter way to stay on top of the multichannel video marketplace. Sign up below.
Mike Farrell is senior content producer, finance for Multichannel News/B+C, covering finance, operations and M&A at cable operators and networks across the industry. He joined Multichannel News in September 1998 and has written about major deals and top players in the business ever since. He also writes the On The Money blog, offering deeper dives into a wide variety of topics including, retransmission consent, regional sports networks,and streaming video. In 2015 he won the Jesse H. Neal Award for Best Profile, an in-depth look at the Syfy Network’s Sharknado franchise and its impact on the industry.