Just a few years ago, some investors -- along with a handful of analysts -- scoffed at the idea of Comcast (NASDAQ:CMCSA) successfully competing with more entrenched players in the mobile phone business. The chorus was repeated in 2018 when Charter Communications (NASDAQ:CHTR) decided to take on the likes of AT&T (NYSE:T) and Verizon (NYSE:VZ) by launching Spectrum Mobile under its Spectrum cable TV umbrella. Cable television companies have a cord-cutting problem to stave off after all, they said, and shouldn't take on a lost cause.
Charter and Comcast are enjoying the last laugh now. Between the 288,000 wireless subscribers Charter signed on last quarter and Comcast's quarterly additions of 261,000, the two cable and internet providers now collectively service a total of 3 million cellphone customers.
That's not the most interesting part of the story for investors, however. Most curious is how both companies utilized their mobile services as a means of selling internet access -- now arguably the more important and fruitful of the two other services each provide.
This bundle actually works
Recently, I suggested the days of cable television companies' bundles were over, with consumers now buying cable, phone, and internet services a la carte. In retrospect, there may be one exception to that new norm. People are willing to buy a broadband/mobile phone combo. Those 3 million wireless customers Charter and Comcast now boast between them? They're also customers of each company's high-speed internet service. It's a requirement, in fact.
The data tells the tale. Comcast once again added residential internet customers -- to the tune of 424,000 -- last quarter in conjunction with its 261,000 new mobile customers. Charter picked up 313,000 internet customers along with its 288,000 new cellphone subscribers during the fourth quarter.
These numbers don't inherently indicate that all new phone customers also signed up for new high-speed internet service; existing broadband customers could also be among the new cellphone subscribers. But, the numbers are strangely close, and the longer-term trend of this data suggests there's a meaningful correlation between the two that somehow Verizon and AT&T haven't plugged into. Clearly some bundles still work.
The contra-data actually bolsters this argument. Verizon, for instance, only picked up 35,000 broadband customers during Q4, bringing its total to 5.9 million, but its total wireless connections (prepaid and postpaid) now stand at 94.5 million, up a whopping 731,000 from Q3's count. AT&T picked up a comparable number of mobility customers last quarter, yet somehow lost broadband customers. Those disparate numbers suggest there's little correlation between the addition of wireless customers and growing a high-speed internet business, perhaps because AT&T and Verizon don't require the purchase of one to buy the other.
Implications for established mobility companies
As for why Comcast and Charter have found co-selling success with a package that would seemingly be difficult to market, one can only speculate. Most plausibly though, I believe the disparate numbers suggest Comcast and Charter are simply in a better position to sell mobile services to consumers than AT&T and Verizon are positioned to sell broadband -- or even television -- to consumers.
Both Charter and Comcast can work with their existing cable television lines to deliver internet and are offloading much of their mobility workload to localized wifi connections in a way that ultimately lowers the cost of providing such service. That, in turn, means it can sell such service for less -- and they are. Neither Verizon nor AT&T has enough of the right infrastructure or technology in place to do the same, and instead, they rely on conventional mobile phone towers and spectrum. It's a more expensive means of connecting customers' phones to a network.
Addressing that cost is still a logistics nightmare for the phone giants, too. Whereas Comcast and Charter can mount strand-mounted cells on poles propping up cable lines they already own without the need for permission or a permit, Verizon and AT&T can't. They must get approval before setting up a pole-mounted small cell that does the equivalent work.
Far more important, though, is what the advent of lower-cost, wifi-supported (as well as MIMO- and CBRS-supported) mobility means for the future.
While slow and subtle thus far, the two cable giants in question are effectively turning wireless service into the easy, cheap add-on that makes a particular internet service more marketable. Mobile service itself isn't the limited option, premium-commanding service it used to be. That's not to say wireless is a full-blown commodity and priced as such just yet, but it seems to be moving in that direction. It's another problem for the big and entrenched wireless service names simply because their broadband networks are already smaller and less robust than cable companies' are.