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Cable providers are increasingly shifting their focus toward mobile services as a key area for potential growth.
Initially, cable companies like Comcast and Charter Communications ventured into the wireless sector primarily to retain customers within their broadband services. However, just under ten years into this expansion, the mobile segment has become a crucial revenue source and a strategic focus for these companies. “It’s not solely about attracting additional broadband customers; mobile services have proven to offer significant financial returns on their own,” remarked Jessica Fischer, the CFO of Charter Communications, during a recent discussion.
Historically recognized for their pay TV packages and landline services, cable firms are now becoming prominent players in residential internet and mobile communications. Comcast operates under the Xfinity name, while Charter is branded as Spectrum.
Both major players, alongside smaller rivals like Altice USA, have reported ongoing growth in their mobile customer base. Data from MoffettNathanson shows that nearly half of all new wireless lines last year were attributed to cable operators.
This shift in focus comes at a time when the traditional broadband sector faces stagnation and, in some cases, customer losses, negatively impacting stock performance. Cable executives cite fierce competition as a contributing factor, and the timeline for recovery remains uncertain. In response, Charter is revamping its offerings to emphasize mobile, and Comcast has announced similar plans.
In part, the appeal of cable’s wireless services lies in the significantly lower pricing, often hundreds of dollars less annually than standard mobile plans.
Despite this growth in the mobile sector, it has not yet translated into increased stock prices for these companies. Investors appear unconvinced by mobile expansions, remaining largely fixated on broadband issues, according to industry analysts.
Craig Moffett, co-founder of MoffettNathanson, likens the current climate to the period of 2009-2010 when investor sentiment was focused on the decline of pay television, overlooking the potential of broadband growth. “The challengers in the broadband space are not as critical as those that faced pay TV,” Moffett noted. “Broadband isn’t going away, even as competition increases.” He emphasized the substantial opportunity for cable operators in the larger mobile marketplace.
Comcast’s CFO Jason Armstrong underscored the growth opportunities in a recent earnings call, stating that while they dominate the residential broadband market, they are turning into competitive challengers within the broader wireless sector. “Wireless is an essential component of our broadband strategy,” he asserted.
Rapid Growth in Mobile
Since cable companies entered the mobile arena less than a decade ago, they’ve experienced impressive subscriber growth. Charter’s Spectrum Mobile customer base has surged from 1.08 million in late 2019 to nearly 9.88 million by the end of 2024, while Comcast’s Xfinity Mobile grew from 2.05 million to about 7.83 million in the same timeframe. Meanwhile, Altice’s Optimum Mobile has expanded its customer count from 69,000 to close to 460,000.
However, this growth pales in comparison to the massive customer bases of Verizon, AT&T, and T-Mobile, each serving over 100 million wireless users. These larger companies are also increasingly venturing into home broadband markets, offering fiber and high-speed 5G alternatives.
Despite the rapid expansion of mobile customers, cable providers have collectively seen a decline in internet and traditional cable subscriptions, losing over a million internet customers and 8.7 million cable customers in the past three years.
In response to these challenges, Charter has implemented a series of changes to improve its offerings, including competitive pricing and bundling mobile lines with broadband services. Comcast has echoed this strategic pivot, expressing a commitment to enhance its mobile business.
“We will prioritize wireless growth more than ever,” stated Comcast President Mike Cavanagh during a January earnings briefing. Recently, Comcast launched a premium Xfinity Mobile plan aimed at attracting new customers and appointed Jon Gieselman as chief growth officer to oversee the residential business.
Both Comcast and Charter predominantly grow their mobile subscriber bases from existing customers rather than new clientele. For instance, Altice’s bundled services make customers less likely to switch providers, demonstrating the loyalty benefits of such packages. A recent survey by Altice revealed that around 25% of Americans are likely to opt for service bundles, with 80% believing such options are more cost-effective.
Altice USA offers mobile plans to all customers in its service areas, regardless of whether they subscribe to Altice’s other services, setting it apart from competitors that often require customers to be part of a bundle to access mobile services. Altice is aiming to reach 1 million mobile subscribers by the end of 2027.
Michael Parker, President of Consumer Services at Optimum, remarked that while mobile was initially not intended to be a primary revenue driver, it has quickly established itself as a valuable standalone business.
Navigating Market Dynamics
Mobile services harmonize with other aspects of cable operations, with the higher-margin broadband segment helping to offset costs while enhancing mobile offerings. KeyBanc Capital Markets analyst Brandon Nispel noted that while mobile might not stand alone as a lucrative endeavor, bundle offerings can significantly bolster broadband appeal, drawing in both current and prospective customers.
Despite recent gains, cable companies face hurdles related to brand recognition in the mobile space. These companies are newer entrants and, while their brands are familiar to local consumers, they often lack broader public awareness. However, as marketing efforts for mobile services increase, adoption rates have improved.
In the last quarter, Altice’s mobile lines grew by over 42%, largely attributed to enhanced product offerings and marketing initiatives. Charter’s president of product and technology noted a surge in recognition for Spectrum’s mobile services, suggesting they are becoming more common in the marketplace.
Competitive pricing remains a key advantage, providing cable operators with the opportunity to present lower-cost mobile options through partnerships with existing wireless networks, such as Verizon and T-Mobile. This arrangement allows cable companies to offer competitive mobile plans without the overhead of maintaining a network.
Comcast’s Armstrong emphasized that due to these partnerships and the ability to offload wireless traffic onto Wi-Fi, the wireless segment can be a highly profitable venture for their business.
The situation also presents a unique benefit for traditional wireless providers. While they may lose customers to cable companies, they still gain revenue through these partner arrangements. Telecommunications leaders recognize the encroachment of cable firms but express limited concern, understanding that acquiring a new customer could be a prolonged process.
“If cable opts to pursue aggressive strategies, that’s their decision,” Verizon CFO Tony Skiadas stated at a recent investor event. “However, whether the services are offered for free or at a discount, they still rely on us for the underlying network infrastructure.” Meanwhile, AT&T’s CEO remarked that cable companies find themselves at a disadvantage when up against AT&T’s superior broadband offerings.
Disclosure: Comcast owns NBCUniversal, the parent company of CNBC.
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