Comcast eeked out 14,000 broadband net additions in Q3 2022, but it doesn’t look like its luck will hold in Q4. Operator executives warned on an earnings call Comcast expects to lose broadband subscribers in Q4 as a result of damage from Hurricane Ian in Florida. They also obliquely flagged coming layoffs, noting the operator expects to record severance charges in the current quarter as it looks to cut costs.
President and CFO Mike Cavanagh said during the call Comcast’s network was among the hardest hit when Hurricane Ian made landfall in southwest Florida in September. While it’s still assessing the damage, Cavanagh said it expects “tens of thousands” of homes won’t be able to have service restored.
Comcast Cable CEO Dave Watson added the hurricane also wiped out “about half” of its seasonal broadband activity in the impacted area. Those factors mean Comcast is expecting negative subscriber additions in Q4.
While the operator didn't provide specific guidance around the Q4 number, New Street Research came up with an estimate. "Management noted that adds would be negative in 4Q22 due to the impact of the hurricane in Florida," the analysts wrote in one note to investors. They added in another "We were anticipating adds of around zero absent the storm, and so a loss of 40-50k with the storm."
More broadly, Comcast is also teeing up actions to cope with macroeconomic headwinds that have been impacting the telecom industry at large. It seems its efforts will include layoffs, though Cavanagh only hinted at this through a mention of expected severance spending in Q4.
“As we enter the fourth quarter and look to our year ahead, we remain focused on driving long-term growth during an increasingly challenged economic environment. As a result, we expect we’ll be taking severance and other cost reduction-related charges in the fourth quarter in anticipation of expense reduction actions that will provide benefits in 2023 and beyond,” the CFO stated.
The scale of the expected severance charges and cost cutting program is unclear.
DOCSIS upgrades
Comcast leadership reiterated on the call that network investments remain a priority. Watson noted its mid-split upgrades are still underway and it expects to reach 20% of its footprint by the end of this year and the majority of its footprint by the end of 2025. He also reaffirmed its plans to bring DOCSIS 4.0 to market by the second half of 2023 and cover the majority of its footprint with that, again, by end-2025.
As it upgrades the network, Watson said Comcast will work to limit the amount of CPE changeouts that are required for customers to get faster speeds.
Q3 Metrics
Consolidated revenue fell 1.5% to $29.8 billion. The company posted a $4.6 billion net loss, compared to a profit of $4.0 billion in the year prior, due to an $8.6 billion impairment charge it recorded for its Sky business.
Sales in its Cable Communications unit grew 2.6% to $16.5 billion, with broadband revenue specifically up 5.7% to $6.1 billion. Business services revenue was up 9.4% to $2.4 billion, while wireless sales jumped 30.8% to $789 million. Video and Voice revenue fell by 4.4% to $5.3 billion and 12.5% to $745 million, respectively.
The 14,000 broadband net additions marked a sequential improvement from no net adds in Q2, but a sharp decline from 300,000 net additions in Q3 2021.
This story has been updated with an insight from New Street Research.