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Comcast Corporation (CMCSA -7.04%)
Q3Â 2019 Earnings Call
Oct 24, 2019, 8:30 a.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Good morning, ladies and gentlemen and welcome to Comcast's Third Quarter 2019 Earnings Conference Call. [Operator Instructions]
I will now turn the call over to Senior Vice President, Investor Relations and Finance, Mr Jason Armstrong. Please go ahead, Mr Armstrong.
Jason Armstrong -- Senior Vice President, Investor Relations
Thank you operator and welcome everyone. Joining me on this morning's call are Brian Roberts, Mike CavanaghSteve Burke, Dave Watson and Jeremy Darroch. Brian and Mike will make formal remarks and Steve Dave and Jeremy will also be available for Q&A. As always. Let me now refer you to slide number 2, which contains our Safe Harbor disclaimer and remind you that this conference call may include forward-looking statements subject to certain risks and uncertainties. In addition, in this call, we will refer to certain non-GAAP financial measures. Please refer to our 8-K and trending schedules for the reconciliations of non-GAAP financial measures to GAAP. With that let me turn the call over to Brian Roberts for his comments. Brian?
Brian Roberts -- Chairman and Chief Executive Officer
Thank you, Jason, and good morning everyone. We delivered strong operational and financial results in the third quarter with each of our businesses contributing to our company's growth. Together, we surpassed 55 million customer relationships, grew pro forma EBITDA by 7% delivered 16% growth in adjusted EPS, generated significant free cash flow and paid nearly $1 billion in dividends, while further strengthening our balance sheet. Our results in the quarter and over many years are evidence that our strategy is working. From my perspective, four things stood out as we wrapped up the quarter. Our incredible strength in broadband, the enduring popularity of our premium content, our strong global footing just one year after the Sky acquisition and how the combination of these things puts us in a unique position to compete including in the streaming market.
Starting with broadband, it goes without saying the utility and demand for high-speed and reliable Internet access or ever increasing. We see this in our customers' behavior, monthly data usage more than doubled in the last three years and our power users are connecting nearly 20 devices in their homes daily. That's great. It enables us to further differentiate ourselves from the competition. Hence more customers continue to choose Xfinity. The cable team has done a tremendous job redefining broadband by expanding the basis of competition beyond speed to also include coverage and control. With these three pillars speed, coverage and control, our xFi experience is resonating with customers. And with Flex we just added a fourth pillar streaming designed to meet the growing needs of customers who only consume video over the top.
Flex enable these streamers to quickly and easily search, access and enjoy content across their favorite apps on the TV, using our award winning voice remote. It's a wonderful product and now we are providing it to our broadband only customers for free. And at Sky, we plan to follow a similar playbook by using xFi to differentiate the experience for our broadband subscribers in Europe, starting with next year's launch in Italy. So our strengths and ongoing innovations are translating into record-breaking results. Cable added 379,000 broadband customers, the most for a third quarter in 10 years. This drove our best total customer net additions on record for any quarter, contributing to a 3.4% year-over-year increase in customer relationship.
And we're also increasing the value of our relationships. EBITDA per customer relationship grew 3.2% and what is even more impressive, our net cash flow per customer relationship grew 13%. Moving beyond broadband our content continues to resonate with consumers. NBC Universal has the largest TV viewership share of any major media company in the US and one of the leading film businesses in the world.
In Europe, Sky is the number one sports and entertainment brand. And these strengths continued in the third quarter. NBC plays number one in primetime among adults 18 to 49 for the six consecutive 52-week season. Telemundo is number 1 in Spanish language weekday prime for the third consecutive season. Overall household viewership of Sky branded channels increased 10% in the quarter led by sports. And Sky's highly acclaimed Chernobyl received 10 Emmys which bodes well for our newly created sky studios. On top of all this, the teams at NBC Universal and Sky are jointly producing and delivering content. For example, we greenlit our first co-productions, shared over 1,000 hours of sports content and are creating a global news channel.
In fact it's hard to believe that we have owned sky for only a year. Our company is strategically stronger today than we were a year ago. Sky brings 24 million customer relationships in Europe, including the 482,000 net additions in the last 12 months, plus additional premium content and exclusive sports all anchored by a leading European brand and an outstanding team. In what are tough macroeconomic conditions, Sky is doing a great job. Finally, our recent announcements or Peacock and Flex are terrific examples of how our combined company is working together and well positioned to compete. With our leading scale and distribution and premium content, along with our focus on innovation, we can continue to produce superior products like these for our customers and deliver strong financial results for our shareholders.
So all in all, we had a great quarter, led by broadband and it also demonstrates what a fantastic set of businesses and leaders we have that positions us well for the future. Mike, over to you.
Steve Burke -- Chief Executive Officer, NBCUniversal & Senior Executive Vice President
Thanks, Brian, and good morning everyone. I'll begin on slide 4 with our third quarter consolidated results. As a reminder, we completed our acquisition of Sky in the fourth quarter of 2018. Our reported results include Sky from the acquisition date while our pro forma results include Sky as if the transaction had occurred on January 1st, 2017. Also, one housekeeping item on Peacock, our forthcoming streaming service. Similar to our approach with Xfinity mobile, during its start-up phase, we report Peacock's results in the corporate and other segments.
So now let's move on to today's results. On a reported basis, revenue increased 21% to $26.8 billion and adjusted EBITDA increased 17% to $8.6 billion. On a pro forma basis, revenue was consistent with the prior year and adjusted EBITDA increased 7.4%, reflecting growth across all three businesses. As Brian mentioned, adjusted earnings per share grew 16% to $0.79 and free cash flow was $2.1 billion bringing the year-to-date total to $10.9 billion, an increase of 3.7% compared to the first nine months of last year.
Now let's turn to our segment results, starting with cable communications on slide five. Cable delivered excellent results driven by our connectivity centric strategy and highlighted by strong performance in three key metrics we used to run the business. Growth in total customer relationships, EBITDA per customer relationship and net cash flow per customer relationship. Overall, cable revenue increased 4% to $14.6 billion in the third quarter led by the increase in total customer relationships as well as higher ARPU.
Total customer relationships, increased 3.4% year-over-year to 31.2 million, including 309,000 customer net additions the best on record. This growth was driven by 379,000 high speed Internet customer net additions, the highest third quarter net additions in 10 years. We've added 1.3 million broadband customers over the last 12 months. Overall, our connectivity businesses, residential broadband and business services continue to drive the growth of cable. Our revenue in these businesses collectively reached $6.7 billion in the quarter of 9.3% year-over-year. With broadband as the foundation of our customer relationships, we utilize additional products and services in a manner that profitably helps us attract and increase the lifetime value of the overall customer relationship.
Video is still an important profitable component of most of our relationships, but we continue to be disciplined and are not chasing unprofitable subs. Total video subscribers declined by 2.8% year-over-year to 21.4 million. Xfinity Mobile is another important contributor to our growth as we pair it with broadband to provide our customers with a great wireless experience that helps them save money. We added 2,004,000 net customer lines in the 3rd quarter and reduced our quarterly adjusted EBITDA losses at Xfinity mobile to $94 million, an improvement from a $178 million loss in last year's 3rd quarter. Reflecting our progress in scaling and further improving our operations. And as Brian mentioned, Flex is another great product will use to add more value to our broadband centric customer relationships.
Moving now to cable expenses and margin. On slide 6. Total cable expenses increased 2.3% year-over-year, reflecting strong cost management, even as we increased customer relationships by 3.4%. Programming expense was flat, reflecting the timing of contract renewals and the lower volume in video. Non-programming expenses increased by 3.6% year-over-year, but were relatively flat on a per customer basis.
We delivered outstanding growth in customer relationships and also improved our NPS scores while reducing total agent handled calls by 15% and lowering truck rolls by 10% year-over-year. Together, the growth in our connectivity businesses, the improvement in our performance in Xfinity Mobile and our ongoing focus on cost management resulted in cable adjusted EBITDA growth of 6.7% and margin expansion of 100 basis points to 39.8%. We continue to expect EBITDA margin improvement for the full year 2019 to be slightly above 100 basis points compared to the 2018 margin of 38.7% based on our strong performance year-to-date and our outlook for continued year-over-year margin improvement in the 4th quarter.
Cable capital expenditures in the 3rd quarter decreased 6.7% to $1.8 billion leading to capital expenditure intensity of 12.4%, primarily reflecting lower spending and scalable infrastructure and line extensions, partly due to the timing of plant construction and other network investments. However, as we've said, consistent with the broader shift in our business toward connectivity, we will continue to invest in our network to stay firmly ahead of our customers' high and increasing expectations and to further enhance our leading competitive position and broadband. We now expect cable capex intensity for the full year 2019 to improve by at least 150 basis points compared to the 13.8% in 2018 driven partly by timing of network investment as well as decreased CPE spend as video subscribers decline and the rate of our deployment of X1 has moderated. This is an upgrade to our prior guidance of at least 100 basis points of improvement.
In summary, we are very happy with the team's strong performance. In the quarter, we delivered 3.4% growth in total customer relationships and 3.2% growth in adjusted EBITDA per customer relationship which coupled with the decrease in cable capital intensity drove a 13% increase in cable net cash flow per customer relationship. We continue to see the benefits of consistently investing in our network, innovating to deliver the best-in-class products, services and experiences and increasing our operational efficiency.
We believe our approach will continue to strengthen our leading competitive position and drive profitable growth. With that I will turn to NBC Universal's results on slide 7. NBC Universal EBITDA increased 1.6% reflecting expected difficult studio comparisons in TV and film. Cable Networks' revenue decreased 2.8% to $2.8 billion and EBITDA was flat at $955 million primarily due to a 27% decline in content licensing and other revenue, reflecting a challenging, timing related comparison to last year.
As we noted last quarter, our studio benefited from the considerable level of programming license to 3rd parties in 2018. Offsetting some of this decline was a 1.6% increase in distribution revenue, reflecting the ongoing benefits of previous renewal agreements, partially offset by subscriber losses that have moderately accelerated driven by increased satellite losses and slowing virtual MVPD growth. Lastly, advertising revenue was consistent with last year's result as a strong pricing environment was offset by audience ratings declines.
Broadcast revenue decreased 9.1% to $2.2 billion and EBITDA increased 5.1% to $338million due to challenging comparisons in advertising and content licensing more than offset by healthy growth in retrans and lower programming and production costs. Advertising revenue declined 12%, primarily reflecting a difficult comparison to last year's results, which included Telemundo's broadcast of the FIFA World Cup.
For the remainder of the year, we have a positive outlook on the ad market with the start of the NFL season and the return of original entertainment programming as well as the benefit from higher upfront pricing. Content licensing declined 17%, reflecting a challenging comparison to last year's results due to the timing of delivery of content under our licensing agreements. Retrans revenue increased over 10% to nearly $500 million. Lastly, on the expense side, lower programming and production costs were primarily driven by costs associated with the FIFA World Cup in the prior year.
Filmed entertainment revenue decreased 6.2% to $1.7 billion and EBITDA declined 8.7% to $195 million. While the Fast and Furious spin off Hobbs & Shaw delivered strong results in the quarter, it was a tough comparison to Jurassic World Fallen Kingdom and a higher number of films in last year's 3rd quarter. Despite experiencing a crowded box office so far in the 2nd half of this year, we currently expect healthy growth in full year film EBITDA over 2018 results.
Looking ahead to 2020, we believe we can achieve even better results as our strategic plate includes 3 major animated sequels and another instalment and our Fast and Furious franchise. Theme Parks revenue increased 6.8% to $1.6 billion and EBITDA increased about 1% to $731 million. These results reflect higher attendance as well as an increase in operating cost. The higher attendance was due in part to severe weather and natural disasters that negatively impacted attendance in Japan in last year's 3rd quarter. While the parts business is subject to some ebbs and flows, we are pleased with our summer launches of Jurassic World in Hollywood and our Hagrid Themed Harry Potter Coaster in Orlando.
And we remain bullish on our growth opportunities with Super Nintendo World opening in Japan in 2020 and domestic launches thereafter. Our new Beijing park opening in 2021, and our recently announced 4th Gate in Orlando, Universal's Epic universe.
Moving on now to Sky results on slide 8. As a reminder, I will be referring to our pro forma results as if the Sky transaction had occurred on January 1st, 2017 and growth rates on a constant currency basis consistent with what's reflected in our earnings release. Revenue at Sky increased 0.9% to $4.6 billion, reflecting growth in direct to consumer and content revenue partially offset by lower advertising revenue amid continued macro weakness in European markets. Direct to consumer revenue increased 1.9% to $3.8 billion, benefiting from customer growth but partially offset by a decline in the average revenue per customer.
In the 3rd quarter, customer relationships decreased by 99,000 following record streaming growth in the 2nd quarter related to Game of Thrones and the debut of the highly acclaimed Sky original, Chernobyl both of which were exclusive to Sky Atlantic. Year-to-date Sky added 317,000 customer relationships and we expect to return to customer growth in the 4th quarter.
Michael J. Cavanagh -- Senior Executive Vice President & Chief Financial Officer
Content revenue increased 15% to $315 million reflecting increased monetization of our original programming slate and the wholesaling of sports programming. Investment in sports continues to be a key differentiator. Audiences viewing tent pole sports programming are increasing with household viewership on Sky Sports channels, up 21% year-over-year, reflecting great starts to the Premier League, Serie A, Bundesliga as well as broadcast of the Cricket World Cup and the Ashes. Advertising revenue declined by 14% to $446 million, largely reflecting the impact from a change in legislation, resulting in certain gambling advertising restrictions in the UK and Italy as well as advertising market weakness across all territories. Pro forma EBITDA at Sky increased 46% to $899 million excluding certain non-recurring items in both periods growth would have been in the mid-teens on a constant currency basis. For the full year, at today's currency rates, we expect reported EBITDA will be close to $3.1 billion.
Wrapping up on slide 9 with free cash flow and capital allocation. For the 3rd quarter, we generated $2.1 billion in free cash flow and paid $955 million in dividends. Free cash flow in the 3rd quarter was largely impacted by the timing of Sky sports rights payments, which are heavily weighted to the start of the new soccer seasons. Year-to-date we generated $10.9 billion in free cash flow. In the 3rd quarter, we monetized a substantial portion of the minimum for over value we negotiated for Hulu, which brought in $5.2 billion in proceeds.
In addition, starting in 2024, to the extent of total equity value in Hulu is worth more than the total floor value of $27.5 billion, we will realize our share of that upside. Since the acquisition, we continue to make very good progress in our deleveraging efforts. Year-to-date, we have paid down roughly $11 billion of our consolidated net debt ending the 3rd quarter at 2.9 times net leverage down from 3.3 times at the end of 2018.
We expect to meet our commitments to the rating agencies by year-end 2020. As a reminder, the rating agencies make certain adjustments in their leverage calculations that can add up to a quarter turn to our leverage ratio. In closing, our results today highlight the strength and consistency of our company's overall performance and we couldn't be more pleased with our strategic and financial position.
Looking ahead, we remain confident in our ability to continue executing on our long-term growth strategy and to deliver value to our shareholders. So with that, I'll turn it back to Jason to lead our Q&A.
Unidentified Speaker
Thanks, Mike. Regina, let's open up for Q&A, please.
Questions and Answers:
Operator
Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from the line of Ben Swinburne with Morgan Stanley. Please go ahead.
Ben Swinburne -- Morgan Stanley -- Analyst
Thank you. Good morning. I wanted to just follow up on some of your comments on streaming, both from a cable and in NBC perspective. For Brian or Dave, how are you guys thinking about Flex? What does that mean to the business overtime in your view? And how do you think about investing in the X1 platform going forward, obviously the video business going through a transition, but you've invested a lot of money into that, that platform, it's done well for you. I'm just curious how you think about the product evolution there and how important is it to Comcast Cable. And I'll just ask Steve on Peacock and sort of the NBC strategy, how are you thinking about content exclusivity and sort of the volume of original programming that you want to see over time. And when you look at some of the numbers out there for talent and runners from the Apples and Netflixes of the world. What is your reaction, do you view this as healthy or irrational or how do you see yourself navigating this spending landscape? Thanks, everybody.
Brian Roberts -- Chairman and Chief Executive Officer
So let me just this -- Brian, let me just quickly kick it to Dave and then we'll go to Steve follow the order of your questions. But I'm fairly pleased with the innovation team and how we made a pivot few years ago and I think the right call which was to really focus on to broadband. In addition to video and in some ways of making that the lead lead part of where we're going and one of the results was the X-Fi whole brand that's now stands for much more than speed. And with Flex, in particular, we're just now going to market with the free box to broadband only customers across the entire platform, whether you have our gateway or not. So there is real innovation ahead on that platform and I think that that can reveal itself over the time as we go forward. But the point being that the team, the recruiting, the retaining of the people to do the technology for this company, I think is second to none. And I'm really pleased with it. Dave?
David L. Cohen -- Senior Executive Vice President & Chief Diversity Officer
Thanks, Brian. Yeah. And Ben so it -- Flex I think is a great example of leveraging the innovation engine that we've had on X1 for some time. So we'll continue to make sure that relevant content is available and delivered through X1 and Flex, but it's, we just have such scale with X1 and it's a really efficient way to leverage this platform with Flex. And our view with Flex and providing more value to broadband and with streaming, it's just a great option for those customers that want an integrated experience. I think we see often bolt on one off options of different apps that are available, what we are delivering to our customers is just a great streaming experience with Flex and it's completely integrated, the content is available through the voice remote just like X1. So we're, we're pleased with the innovation focus that's been able to put us this position with Flex, so off we go as Brian said very soon.
Brian Roberts -- Chairman and Chief Executive Officer
Steve?
Steve Burke -- Chief Executive Officer, NBCUniversal & Senior Executive Vice President
So, regarding Peacock, we announced about a month ago the name and listed a fair number of shows that we're going to have on the service. I think the most important thing to think about as you're thinking about Peacock and its role inside NBCU and broader Comcast is we're not, we're not doing the same strategy that Netflix and people chasing Netflix have adopted. We're primarily working with the existing ecosystem and doing a lot of AVOD activity. And what that's going to do, we think is make the -- it has cut the investment pretty substantially, because I think we're going to get to cruising altitude much more quickly than a subscription service. We're also playing to our strengths. We happen to be part of a company that has 65 million video customers and is the biggest provider of television advertising in the United States.
So we'll have a a mix of originals exclusive acquisitions like the Office and a lot of non-exclusive product as well. Importantly, we're going to keep selling to other companies. We, if you take movies, for example, we plan to keep selling into the premium window. We're not taking all of our movies off of premium platforms like HBO or Sky or other platforms around the world. So I think our approach is different. I think it fits the strengths and characteristics of our company well. And it's a very, very interesting time as everybody tries to figure out what their strategy is and we're very optimistic, we're planning on launching in April.
We're going to use the Olympics as sort of an afterburner after our launch and then we'll be adding content pretty, pretty significantly throughout 2020 and I'm very pleased with the technical progress our team is making. It's a wonderful product. The product is beautiful and very different and I think it's something that we're all going to be very proud of, when we launch in April.
Ben Swinburne -- Morgan Stanley -- Analyst
Thank you.
Brian Roberts -- Chairman and Chief Executive Officer
Thank you, Ben. Next question please. Your next question comes from the line of Jessica Reif Ehrlich with Bank of America Merrill Lynch, please go ahead.
Jessica Reif Ehrlich -- Bank of America Merrill Lynch -- Analyst
Thanks. A couple of questions. I'm just continuing on Peacock. Can you talk about the ramp up and spent and is that the reason why there was such a big swing in working capital in this quarter? And then within Peacock, can you talk about the marketing plan with in and outside the ecosystem and how confident you are in the advertising person that you guys have talked about? And then, different subject, about Telemundo, given the growth in ratings, excluding the World Cup have you closed the revenue gap versus your ratings. And then the last question on cable or number of your tenure contracts are expiring in the next year, I don't know if you could talk about expectation for step up in costs, but maybe
You know how you're thinking about the next rounds of negotiations, but what are the key considerations, especially as programmers rollout their own streaming options?
Michael J. Cavanagh -- Senior Executive Vice President & Chief Financial Officer
Jessica it's, Michael. I'll just jump in ahead of, Steve, on the working capital. Working capital this quarter is primarily the change is Sky, both the inclusion of Sky versus prior year together with the second half of the year, particularly 3rd quarter is when football rights payments across Bundesliga, Serie A and Premier Leauge kick in. So that's what's going on in working capital. Pleased with working capital and free cash flow obviously for the year to date, but lumpiness in working capital.
Steve Burke -- Chief Executive Officer, NBCUniversal & Senior Executive Vice President
So in terms of the Peacock spending, marketing plan, etc., I think we're going to remain pretty quiet until a month or two before launch in terms of the details for competitive reasons. Telemundo has been a huge success for our company -- we've -- as Brian mentioned in his introduction, we've beaten Univision, which was at one point unthinkable, they were so far ahead, we beaten Univision in Prime Time, every year for the last 3 years and we're making real progress during the daytime.
We have not closed revenue gap in terms of retransmission consent, which leads into your next question about the cable channels, we have a lot of deals expiring in the next 12 to 24 months. And channels like Telemundo that have made big strides, MSNBC is another one, MSNBC is solidly beating CNN almost every night, and by a fair margin. And CNN has a much higher affiliate fees than we do. I think you can expect to see us make some real progress there. But we're not going to be precise about numbers until the negotiations are completed.
Jessica Reif Ehrlich -- Bank of America Merrill Lynch -- Analyst
And the question from the cable operator perspective?
Michael Rollins -- Citi -- Investor Relations
Jessica, so So, yes, so we won't comment in future time periods, but it's clear we've had a couple of years where it's been a cycle, where we've had lower cost increases in programing, certainly recognized that in future times there, that could change and we have more headwinds. But a couple of things, one, the whole landscape is evolving and changing for those that would go directly to the consumer, that is game changing. We all know that.
I think the key thing we talked a little bit before, X1 is strategically important to us. It just gives us flexibility and either the customer has choice or a ton of choice on different platforms defined content and we want to be a great platform for all the content that makes sense for our customers. So we're going to be disciplined as we approach all these matters and we're going to use data to understand the real value and to the extent that it is available on other platforms will consider all those things.
Jessica Reif Ehrlich -- Bank of America Merrill Lynch -- Analyst
Thanks.
Brian Roberts -- Chairman and Chief Executive Officer
Thanks, Jessica. Next question please. . The next question please.
Operator
Your next question comes from the line of John Hodulik with UBS. Please go ahead.
John Hodulik
Great, thanks. Maybe a couple of questions more for Steve on D2C . First of all, will the peacock product be bundled with Flex and you maybe more broadly have you been surprised at how promotional the landscape has been on the, on the D2C side thus far? And as you look out into 2020 do you think that all these launches and the uptake and frankly how aggressively these things have all been priced will have an incremental impact on the traditional ecosystem in terms of both viewership and subscribers. Thanks.
Steve Burke -- Chief Executive Officer, NBCUniversal & Senior Executive Vice President
Well, most definitely Flex is a huge opportunity for Peacock, and Peacock will be front and center on Flex and Dave may want to speak to that more. But I think it's not only an opportunity for Peacock, but it's a great opportunity for Flex to be able to give a lot of great NBC programing shows like The Office to people at no additional charge to a broadband sub or cable sub.
I think in terms of the overall ecosystem in the promotional intensity, I don't -- it's not too surprising to me. I think you've got the 3 biggest media companies. Disney, Time Warner and NBC Universal all launching streaming platforms and this is a moment in time and a lot of people are being very, very aggressive about it. And I would anticipate that to happen until at some point there will be an inevitable slowing down and shake out and the market will get a little bit more rational, but I think it's a moment in time and consumers are making their choices of apps and viewing habits and you want to be aggressive to get in there and make sure that your services one of the consumers handful of favored services
John Hodulik
And then just --
David L. Cohen -- Senior Executive Vice President & Chief Diversity Officer
Hey, John. This is Dave just to one of the comment in the importance of Peacock to Flex and Cable. I think it's enormously important and a showcase on why it really matters, how we work well together to make the experience even better. So we, we are very much going to be active and promotional but we're extremely focused on the experience and it happens when the 2 teams are working so well together.
John Hodulik
Does it concern you guys that the bundling these products together could accelerate the trends that we're seeing in terms of the traditional TV ecosystem?
David L. Cohen -- Senior Executive Vice President & Chief Diversity Officer
I think that the trajectory is pretty clear and it's -- the marketplace is evolving anyway. And so, Flex is, I think they are going to be a targeted focus for us toward the high-speed Internet-only segment. Will continue to do that, but we're going to make sure that all of our broadband customers know that will be included and we think this is the right step and the right thing for that segment.
John Hodulik
Okay. Thanks, guys.
David L. Cohen -- Senior Executive Vice President & Chief Diversity Officer
Thank you, John. Next question please.
Operator
Our next question comes from the line of Doug Mitchelson with Credit Suisse. Please go ahead.
Doug Mitchelson
Thanks so much. Just on the broadband side, Dave, anything unusual driving the quarter, we're always asked and I imagine you're always asked about the longevity of subscriber growth in broadband. And so, any update on DSL subs in the footprint and how you're competing against fiber and upside you see in broadband penetrations would be helpful. And then, you know Brian, and I guess and for you again, Dave. On the wireless side, obviously our continued hot topic, any thoughts about your MVNO and the leverage that you might be building as you grow that subscriber base, you grow the amount of revenue that you're paying out to Verizon and also were asked a lot about Stratton Mountain and if you've tested that have any thoughts on the effectiveness on Stratton Mountain and whether or not that would help a wireless network partner that would be appreciated? Thanks.
David L. Cohen -- Senior Executive Vice President & Chief Diversity Officer
Thanks, Doug. So let me start with broadband. We're very pleased with the quarter. We've had solid performance in broadband all year. So there is another quarter consistent quarter solid performance. And so clearly well over another year of $1 million plus net customer growth. In the drivers from I think are very consistent. I think the marketplace is growing. We have penetration upside and that's going to continue. And our focus as Brian said, we shifted gears, just our innovation engine has been absolutely focused on broadband.
And so the key for us is to differentiate the product and it's the combination of speed, coverage, control and now streaming with Flex. And this is all Xfi. So we're, I think we have a very different product in the marketplace and a key thing that we have is consistent focus while others they may change from time to time, we've been squarely focused across the entire enterprise on having a great broadband experience, and that's how we compete.
So that our innovation engine is all over the aspects that I talked about. And so, nothing has changed competitively, nothing has changed in segments, whether it's Internet essentials or anything else, it's been pretty normal activity in that regard. But what we've seen is broad-based strength across the entire geographic area and across all segments. So it's just robust growth and I think an important point to bring up is not only share growth, but it's also strong financial results that we're delivering residential broadband ARPU is up 4.2% and residential overall broadband revenue is up 9.3%. So just robust growth and both category, so I like our position going forward.
In wireless, I would say that we are [Indecipherable] is always to deliver also here the best experience that we can and -- but we are absolutely looking at options and leveraging our infrastructure with wireless options. We're always studying and we are actively testing the options of being able to [Indecipherable] in any number of different ways.
So we look at the, the trade-offs between price and volume. And then the amount of data on our MVNO network and then when you offload data to our own network. So we will continue to test, we'll continue to look at this very closely and we think it's will be opportunistic when things come up more, more to come later, but we will actively consider that.
Douglas Mitchelson -- Managing Director
All right. Thank you.
Brian Roberts -- Chairman and Chief Executive Officer
Thank you, Doug. Next question please.
Operator
Your next question comes from the line of Marci Ryvicker with Wolfe Research. Please go ahead.
Marci Ryvicker -- Wolfe Research
Thanks, two questions. First, we've seen video subs decline at an accelerated pace for a while now. So, can you just comment on who you're losing and do you have any visibility into when video levels out and you are at a point where you maintain those core customers who really appreciate the bundle. And then secondly on Sky, what's driving expected customer growth in the 4th Quarter? So we're still new to this asset. Can you remind us why Sky was down in the first couple of quarters of the year. Any seasonality we should think about anything in particular? Thank you.
David L. Cohen -- Senior Executive Vice President & Chief Diversity Officer
Marci, Dave. So we start with video and remind everyone that our primary focus, Cable is in driving growth in that overall number of customer relationships and then driving the lifetime value of those relationships. So we segment the video base of customers and we're focusing on growing profitable video relationships. And there are some segments, where customers are in lower end packages, the skinny bundled video that and often they're in promotional packages and we work hard retaining customers, but if we can't profitably serve this segment, then we're going to move them to a broadband on only relationship. And so not chasing the lower end, the video segment is behind the difference I think in the video results, to also remind folks though that we added a record 309,000 total customer relationships in Q3 ending the quarter with 31 million customer relationships up 3.4% year-over-year and EBITDA per customer relationship is up 3.2% and net cash flow is up the per customer relationship at 13.2.
So we've been able to make this transition. This is being consistent. We're going to -- a video is important to us, but that it is profitable in key segments and for those key segment we package it with broadband, will continue to stay very disciplined and focused around that.
Brian Roberts -- Chairman and Chief Executive Officer
On Sky, Jeremy you're on the phone?
Jeremy Darroch -- Group Chief Executive, Sky
Yes. So, yeah, in terms of Q4, I think I'll talk about video first of all. Christmas is a big -- always remains a bigger quarter for us in video in Europe. Bear in mind of course you go lower penetration typically over here of our market. So the idea of upgrading your TV for Christmas to pay TV to Sky remains a strong idea for us here. It's still aren't acute as it used to be in the past when our businesses executed, but but it remains important. So, the business really quite quickly shifts to the room to that Christmas as part of that will be driving Sky Q in particular very hard over the next quarter. Sky Q which is, I think it's best quality up-based TV experience by a long way, is about 40% of our business today. We think we can get it a lot higher. So that's going to be central to our plans. Alongside that our programing makes really shift. So at the back end of the summer, we're very focused slow start of the football season is important here. We've had a strong schedules for this summer. So our focus on screen really moves to entertainment and the Sky studios in our own originated content. We've got a succession of Sky originals that will be coming to market in the next few weeks and we really get behind that.
And then cinema where we have still really quite a strong leadership in terms of our cinema proposition. Away from TV, it's pretty much steady as she goes both in broadband and mobile. I'm very pleased with the progress in particular we're making on mobile where we've seeing now as a service leader against all of the mobile operators. So I think our growth from Com's business should be pretty strong I hope over the next 13 weeks. And again Mobile continued with handsets is quite a good Christmas product, so we'll get behind us.
Brian Roberts -- Chairman and Chief Executive Officer
Great.
Marci Ryvicker -- Wolfe Research
Thank you.
Brian Roberts -- Chairman and Chief Executive Officer
I would just add it from my perspective for the first 9 months of the year, I think Sky added in the last 12 months running close to 400,000 subs, I think, Jason or Jeremy. So I think it's tough economic headwinds over there. We read about it every day and uncertainty has never your friend and in business climate and there's an awful lot of uncertainty, but we're really pleased, I've certainly am with Sky one year later what it's done for the whole company, giving us all the plans that Steve and Dave have been talking about, it's completely integrated and Jerm and his team I think are executing great. Jason?
Jason Armstrong -- Senior Vice President, Investor Relations
Thanks, Marci. Next question please.
Operator
Your next question will come from the line of Brett Feldman with Goldman Sachs. Please go ahead.
Brett Feldman
Thanks for taking the question. You continue to see I think slightly more than 100 basis points of margin expansion in cable communications this year. I believe we've done 100 basis points or more every quarter so far this year. So I'm wondering, are there going to be any headwinds in the 4th quarter that prevented you from improving that outlook. And maybe just to be more specific, it does look like the technical and product support costs did grow a bit more quickly in the 3rd quarter. I was hoping you could give us some insight into that. I think maybe your MVNO costs are in there. And then just the last accounting question on this as Flex penetration grows, would we see that in opex or capex? Thanks.
Michael J. Cavanagh -- Senior Executive Vice President & Chief Financial Officer
So, Brett, it's Mike. I'll start. So we do -- we expect to be better than 100 basis points improvement in margin as we've said. And in the 4th quarter, particularly, we expect to see healthy year-over-year margin improvement in cable, but just remember that it's a political comp in that quarter as well. But net of all that healthy 4th quarter margin growth coming in cable and that will flow through to the full year.
David L. Cohen -- Senior Executive Vice President & Chief Diversity Officer
Hey, Brett, Dave. So, specific to Q3 always remember Q3 is technically a little busier with back-to-school activity. And so, that's always good, welcoming the kids back. So but Mike talked about Q4. I think important are the fundamentals going forward of the non-programming expense and that are positively impacting margin. One, continued focus on the connectivity business going stay business services, residential broadband, it just improves margin in doing that, we are making significant improvements in the serving customers through digital means.
So we're going to continue to press on that. We think it's a great opportunity. We're in early innings on that. And then overall cost control remain very focused on that as well. So I expect those fundamentals to carry forward and to the point, Mike made where given 4th quarter has the political tougher comparison, but we still expect healthy growth going forward.
Michael J. Cavanagh -- Senior Executive Vice President & Chief Financial Officer
And then on Flex, Flex I think of that as capex, but as we've said before, I don't give multi-year guidance. But on capital intensity, the improvement that we've seen of greater than 150 basis points projected for this year, we've always said, the trends behind that are we expect to see them continue and I don't think the initiative around Flex would change -- it is going to change that.
Unidentified Participant
Okay. Thank you.
Unidentified Speaker
Thank you, Brett. Next question please.
Operator
Your next question comes from the line of Jennifer Fritzsche with Wells Fargo. Please go ahead.
Jennifer Fritzsche
Thank you. Two if I may, one back to wireless, there is a number of spectrum auctions coming up, CBRS next summer, CBN being talked about even Millimeter Wave. Can you talk a little bit about Spectrum ownership, if you look at these three options, is it something you could see participating in a more formal way if only or offload to more traffic from your MVNO to your hotspot to your own network?
And then secondly, if we look at the components of your capex, line extension and scalable infrastructure were down year-over-year. I know in the past, you had mentioned timing issues there. Should we expect that continue to be on a steady decline or is it, or should we not. Thanks.
Brian Roberts -- Chairman and Chief Executive Officer
So a wireless in terms of Spectrum, we'll always be opportunistic, we'll evaluate every option nothing more really to cover on that, but we always look at different options. And to my earlier point, we are actively looking at models that may work in terms of leveraging our infrastructure and to the extent -- I think we're in a great position in regards to the cable infrastructure and we're going to lead the way in terms of understanding that and testing different options, but we'll be, we'll evaluate as things come up.
In terms of capex, I think we continue to make very good progress and proving our capex intensity and as mentioned on track for at least another 150 basis points reduction this year. And it's a consistent approach that we're going to, we'll continue to invest where we need to in the connectivity business, but we're going to realize the reductions as video CPE continues to not be a big driver for us. So I think that you expect going forward those fundamentals to continue.
Michael J. Cavanagh -- Senior Executive Vice President & Chief Financial Officer
And Jen, it's Mike, I'd just add that, on those particulars scalable infrastructure and line extensions, that's more timing 3rd quarter versus I'd look at it over a 12-month period rather than quarterly on that one.
Jennifer Fritzsche
Great, thank you.
Jason Armstrong -- Senior Vice President, Investor Relations
Thanks, Jennifer. Next question please.
Operator
Our next question comes from the line of Philip Cusack with JP Morgan. Please go ahead.!
Phil Cusick -- J.P. Morgan -- Analyst
Hey, guys. One, and then if I can I guess 2 follow-ups. One, Mike, to just follow up on what you just said. It sounds like there's some push out on the network capex side. Expand on that a little bit. And then a follow-up for Jeremy on Sky, can you break down the drivers of local revenue decelerating. It looks like the DTC revenue is fairly consistent in local, but ad revenue was down a lot. I know there some issues around sports and content sales were down as well. What's -- what in there was a one-time hit versus being more permanent? And then just one other question, growth in Parks has been volatile around storms and maybe competitive issues and you aren't opening gates like you had been once. How should we think about the underlying growth at the Parks business. Thanks guys.
Michael J. Cavanagh -- Senior Executive Vice President & Chief Financial Officer
So, Phil, it's Mike. Not too much to add to what I've said thus far on Cable capex. I mean, I do think hard to look at one quarter to the next to the next, the network, we're happy to invest in the network as usage of the network keeps going up and want to continue to stay ahead of customer expectation. So we expect that's very healthy capex going into the, into the network, but it just is a little lumpy, I wouldn't say things are pushed out so much that it files its own timing based on what folks in the field are doing.
And so, stepping back up we are getting more efficient on capital intensity. Two years in a row now, this year, heading toward the 150 basis points of intensity improvement year-over-year. And, as I said, we don't get into multi-year guidance, but I think the expectation of the ability to scale the network, to scale the business and what's going on in CPE gives us confidence that those trends ought to continue and again that's despite the opportunity that we have with Flex.
Jeremy Darroch -- Group Chief Executive, Sky
Yeah, Jeremy here. In terms of revenue trends, ad revenue, I'd say broadly -- look, I said about a 3rd of it is market, TV market, advertising markets in Europe as you know we're pretty much sure in the pressure with mid single digit, perhaps a little bit more declines that year-on-year and that's quite different from what you're seeing I think in the US at the moment. And probably the bound to that is really down to gaming legislation change here, which is specific to UK and Italy houses arrived in in Germany and are probably disproportionately affected by that, of course, because we've got such a strong sports business and are the sports leader in Europe, but it will work it's way through over the course of this year.
In terms of content, so if you have any they're up, so the progress we're making in content sales as we saw to commission more of our own content is good. It is down quarter-on-quarter, but there's nothing structural now, it's just a bit lumpy obviously useful as we scale of these, some of that lumpiness will disappear, but at the moment we see a little bit of that.
Michael J. Cavanagh -- Senior Executive Vice President & Chief Financial Officer
So in terms of the theme park business, 6 years ago, we made about $1 billion in the theme park business and now we're at about $2.5 billion, so the theme parks have been historically one of the fastest growing parts of our portfolio. And we have a lot to look forward to. We're opening Nintendo in Japan in Osaka in our theme park in Osaka, which is very close to the headquarters of Nintendo and Kiro. And then if you go out into 2021, roughly 18 months from now, we open in Beijing. And Brian and I were there last week with Tom Williams, who runs our theme parks. It's going to be a spectacular park and we're really looking forward to that. And we recently announced, we're doing a 4th Gate in Orlando In 2023. We think that theme park business is a great business for us and we're going to be making the investments to try to grow cash flow aggressively in the future. Thanks guys.
Jason Armstrong -- Senior Vice President, Investor Relations
Thank you, Phil. Next question please.
Operator
Our next question comes from the line of Craig Moffett with MoffettNathanson. Please go ahead.
Craig Moffett -- MoffettNathanson -- Analyst
Yeah, hi. Two questions for David if I could. One, just to follow up on the questions that have been asked about wireless, being able to offload traffic from the -- your own or from the MVNO agreement with Verizon on to your own small cells. As I understand, it will require an eSIM programing. And I'm sure you've tested that at this point given the eSIM inclusion in the new iPhones, for example. Can you just talk about how comfortable you are with your ability to manage traffic and direct it between your own small cells and the Verizon network just based on eSIM programing.
And then a second question, it's been a while since we've really talked about the Commercial Services business, but business services is now getting close to 14% of your Cable revenues. I wonder if you could just update us on your penetration levels in the various segments of business services and where the growth is coming from at this point? Is it -- are you really starting to take care in the enterprise market now or is it still primarily small medium business.
Michael J. Cavanagh -- Senior Executive Vice President & Chief Financial Officer
Hey, Craig. So first on wireless, we're absolutely testing eSIM, Dual SIM capability on both whether it's iOS and/or Android. We think that is an opportunity and we'll continue to look at that and that does go with any offload strategy. So we're very active in thinking through that and whatever in terms of the business models and the business planning around it, any potential shift will be positive net economic outcome for us as we look at, but it's early. Still but I do think that there is promising opportunities when you combine Dual SIM with the cable infrastructure.
Second thing, in terms of business services, yes, it's -- a really important part of our growth and it has been and will continue to be, we're generating almost $8 billion in annualized margin accreted revenue. And the adjustable market now has got about $50 billion when you include new product opportunities, everything from Wi-Fi, security cameras, cell back up, SD WAN, so you add up all those things, we're -- for those products it's still early innings on that.
So we're going to continue to be very focused on this opportunity. In all three segments, you asked about penetration, we still have opportunity in all three. S&P [Phonetic] is a little bit more mature, but there's growth opportunities there in mid-market and certainly enterprise we're in the high single digits at this point working well, getting key clients on. So there is good upside. I think we have a competitive advantage across the board in every segment we have a better product, superior product, we have better service and in terms of how we locally deliver it and pull it all together, we have great pricing and I think I like our position versus incumbents in this regard.
Jason Armstrong -- Senior Vice President, Investor Relations
Great, thank, Greg about
Jeremy Darroch -- Group Chief Executive, Sky
Because we're going to, we're also going to launch a broadband business offering here in the UK and that will be our first significant entry into that segment, we're doing direct from the [Indecipherable] team. If I would broaden one of the team across to lead that business here, so we'll broaden out from the residential market in the UK into the business services, Mark, and obviously try and replicate some of the success that we've seen state side and that will be a big new segment for us actually to attack here in the UK and then obviously over time when we get established in Italy, we'll be seeking to do that in Italy as well.
Brian Roberts -- Chairman and Chief Executive Officer
Yeah, I just want to say that's a great up point Jeremy, we've between Matthew Strauss going to Flex. from Flex to Peacock, technical leads and finance and of course now business services in the UK and there is senior marketing team coming to cable from Sky. The immigration, as I said, is one of the real highlights and makes the company unique in the conversation we've been having here. And then just on the wireless point, I just want to add in a number of questions there. I think all of this is -- the trend is going in a way that is very supportive of our capital-light approach to wireless. We're getting scale, we're learning all the realities of a new business extremely well and the technology, the innovation, the handsets, possibly spectrum all the conversation we're having, all of those are net positives to where we're going and we've seen this with Sky in one respect is when you get to a certain point of scale, a number of people want to compete, to have relationships with you.
And so, all that put together, I'm really pleased with the team and we've taken the leader of that mobile area and given some more responsibility to. So just a lot of good momentum across the board.
Michael J. Cavanagh -- Senior Executive Vice President & Chief Financial Officer
Yeah, capital light approach that Brian mentioned, what we're doing today is working, where we're encouraging results and driving, improving broadband retention, attracting new customers through different sales channels and achieving and working toward the path for positive stand-alone economics. So we are a real pleased with our current position and we'll be opportunistic going forward.
Unidentified Participant
Thanks, Craig. Regina, we'll take one last question, please.
Operator
Our final question will come from the line of Michael Rollins with Citi. Please go ahead.
Michael Rollins -- Citi -- Investor Relations
Thanks, good morning. Just approaching Xfinity Mobile from a different direction. What's working from a selling and bundling perspective as you look at the success of adding customers on the platform now for more than 2 years? How important is the retail experience? And is this something that gets expanded to new direct and indirect locations over time? And finally, how do you view the value of bundling OTT media content with the wireless service to create an additional hook whether it's to acquire or retain customers. Thanks.
Michael J. Cavanagh -- Senior Executive Vice President & Chief Financial Officer
Well, there is several things that are going on that are helping. Starting with the fact that we have a great value proposition and we offer By the Gig. We offer a lot of choice in terms of unlimited to select plans that have some pieces of data that are included. So we have a lot of choice that we're delivering. And I think that's helping us achieve success in multiple segments. I think we're in a good position in regards to BYOD, so that helps and then we are in a good position with great new products come out from Apple or an Android side.
So where we kind of have like a full slate covered, in terms of channels, retail, I think the good news is, we were able to sort of upgrade our existing retail without having to spend a lot more in terms of new locations. We do add a few locations here and there along the way. But mostly we've been focused on upgrading retail capability and mobile is absolutely key part of that.
So, and it's helping us, I think attract new business when we do that. So we've been competing whether it's broadband, whether it's mobile, we look at OTT things. I think our value proposition is terrific as is, and we are extremely competitive with our base core offering and there's a lot of choice out there in segments. We've been competing against those that have offered different kinds of OTT offers and we've done quite well and we respond competitively, all the time to different kinds of offers. So I think we're in a good position.
Jason Armstrong -- Senior Vice President, Investor Relations
Okay. Thank you, Mike. And with that we'll wrap up the call. We want to thank everybody for joining us today. Regina, back to you.
Operator
There will be a replay available at today's call starting at 12 o'clock PM Eastern Time. It will run through Thursday, October 31 at midnight Eastern Time. The dial-in number is 855-859-2056 and the conference ID number is 8088543. A recording of the conference call will also be available on the company's website, beginning at 12:30 PM Eastern Time today. This concludes today's teleconference. Thank you for participating. You may all disconnect.
Duration: 63 minutes
Call participants:
Jason Armstrong -- Senior Vice President, Investor Relations
Brian Roberts -- Chairman and Chief Executive Officer
Steve Burke -- Chief Executive Officer, NBCUniversal & Senior Executive Vice President
Michael J. Cavanagh -- Senior Executive Vice President & Chief Financial Officer
Unidentified Speaker
David L. Cohen -- Senior Executive Vice President & Chief Diversity Officer
Douglas Mitchelson -- Managing Director
Jeremy Darroch -- Group Chief Executive, Sky
Ben Swinburne -- Morgan Stanley -- Analyst
Jessica Reif Ehrlich -- Bank of America Merrill Lynch -- Analyst
Michael Rollins -- Citi -- Investor Relations
John Hodulik
Doug Mitchelson
Marci Ryvicker -- Wolfe Research
Brett Feldman
Unidentified Participant
Jennifer Fritzsche
Phil Cusick -- J.P. Morgan -- Analyst
Craig Moffett -- MoffettNathanson -- Analyst
