Comcast Announces Plan To Offer Wireless Service In Bid To Reduce Customer Churn

Comcast Corporation (NASDAQ: CMCSA) CEO Brian Roberts has announced intentions to offer an MVNO-based wireless plan by mid-2017. While this move has been anticipated for some time, it could force other companies toward being more vertically integrated, Barclays’ Kannan Venkateshwar said in a report. He maintained an Overweight rating on the company, with a price target of $70.

“The benefits of new revenue lines are likely to compound over time due to variables like churn reduction,” analyst Venkateshwar mentioned.

Full Network Ownership Unlikely

While stating that different versions of cable wireless had not been successful in the past, Venkateshwar noted that this time there was a difference, which in part was the evolution of:

1. Cable infrastructure
2. Technology platforms and handset ecosystem
3. Consumption patterns

The analyst believes that Comcast’s main objective of offering wireless plans was to reduce churn in its core base, which is why the company is “unlikely to attempt an inorganic path near term until its MVNO-based business scales to a certain critical mass and provides some proof of concept.”

Opportunity Size

Venkateshwar believes the wireless headline opportunity could be accretive by ~$14 billion in revenue and ~$3 billion in EBITDA “in an end state,” potentially adding ~8-10 percent to EV. Moreover, since this approach would reduce churn across products, the analyst mentioned that the impact from a 10 percent reduction in voluntary churn could add ~4 percent to end-state cable EBITDA.

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