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Comcast stock falls on broadband subscriber forecast, cable CEO remains bullish

Pay TV giant Comcast will add around 1.3 million net broadband subscribers for the full year 2021, Comcast Cable CEO Dave Watson said on Tuesday. That is down from 2 million in 2020 and suggested the growth in the current fourth quarter would come in at roughly 185,000, below many Wall Street analysts’ estimates.

In the third quarter, Comcast had added 300,000 broadband subscribers after a 633,000 gain a year earlier. Comcast’s stock fell on Tuesday and was trading close to its 52-week low.

Wall Street has paid close attention to broadband customer trends given that internet rather than traditional pay TV services are cable giants’ core business these days.

Speaking during the virtual UBS Global Technology, Media and Telecom Conference, Watson said, “The second half has been different than the first” in broadband, with “a real shift in terms of move patterns,” seasonal influences and “a little bit of” changing momentum in the “low-income constraint segment,” especially influenced by potential government subsidies, Watson argued, summarizing the challenges as “a connect-[side] issue.”

But despite that, Watson said 2021 was “still a solid overall year.” And with a penetration rate of just above 50 percent and “very, very good” customer churn rates in the broadband business, Comcast remains bullish on its outlook, given “a lot of upside” when trends improve, he said. “We are not going to stop growing broadband.”

When looking at the past two years, Comcast will have been adding 3.2 million broadband users, Watson also highlighted, calling that “very strong total performance” and “one of the stronger two-year periods we have ever had.”

Watson also touted continuing momentum in wireless growth, forecasting that the current fourth quarter would bring record net gains for Comcast. He also argued that wireless can fuel broadband growth while also being, in itself, a “growth engine.”

Watson on Tuesday also predicted fourth-quarter Comcast Cable earnings before interest, taxes, depreciation and amortization (EBITDA) would grow 7-8 percent, ahead of analysts’ expectations.

Nonetheless, cable stocks were under pressure on Tuesday, even though the broader market gained as investors seemed to focus on the near-term broadband growth. As of 11:15 a.m. ET, Comcast shares were down 6.1 percent, while the stocks of Charter Communications and Altice USA were both 4.5 percent lower.

In a May conference appearance, Watson had shared that Comcast Cable was “more focused” on striking shorter-term carriage deals with TV network companies these days, “because change is so dynamic.” He explained at the time that the company was also focused on making sure the fees paid in deals take into account content partners’ streaming strategies.

For example, Watson said that “how they are going to market with their content portfolio … matters — it matters to the customer, it matters to the distributor.” He added: “So if they are making content widely available through an app, whether it’s SVOD [or other], we are going to make sure that everyone understands that and we can be a great partner in helping them transition, but it doesn’t mean you will overpay during the transition.” The Hollywood Reporter

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