The First Million Is Always the Hardest

Xfinity Mobile Joins the Big Four Carriers in Net Additions

All major US wireless carriers have announced their results for the fourth quarter of 2017, as well as one very small but highly significant mobile virtual network operator: Comcast's Xfinity Mobile.

On a call for analysts, Comcast revealed its Xfinity Mobile service gained net additions of about 187,000 — all post-paid phone lines — and it now has around 380,000 subscribers. This is a tiny number when compared with Verizon or AT&T, both of which have more than 100 million total post-paid connections. Nonetheless, there was a significant inflection point for Xfinity Mobile during the quarter; the service gained more net additions of post-paid customers than Sprint, the fourth-largest carrier in the US. Comcast is beginning to leave a mark in the market.

Xfinity Mobile, which runs on Verizon's network, has a limited but large addressable market. It isn't available to everyone in the US, but rather, only to subscribers of Xfinity-branded Internet services. Xfinity has almost 24 million residential customers in the US, reaching about 75 million individual consumers.

Comcast formally announced the launch of Xfinity Mobile in April 2017 (see Cable and Wireless). This wasn't a surprise, as Comcast already had an agreement with Verizon to use its network for an Xfinity-branded wireless service that made the move good business sense.

Like other cable providers, Comcast is faced with a changing market, where a rising number of customers are choosing to skip video subscriptions, instead opting for over-the-top services to access content. This change shouldn't be embellished. The company still has more than 21 million video subscribers, but this figure has been flat during the past few years, while the number of Internet customers has been growing about 6 percent per year. Currently 11 percent of its residential Internet customers don't rely on the company for video content. Less than two years ago, Comcast had more video subscribers than Internet customers. Furthermore, only 10.3 million people buy its fixed voice services — a figure that represents half of its total video customers (see Instant Insight: Comcast Results, 4Q17 for our analysis of Comcast's fourth-quarter performance). Households continue to cut cords.

Mobility is a way for Comcast to expand its existing accounts, offering another service to its Internet customers so that it can build out bundles and prevent churn. For now, wireless services aren't directly profitable for Comcast. The company reported that its efforts in mobile services led to a loss of $480 million in 2017, and expects to lose $680 million during 2018. This area is an investment for the future, as it learns the wireless business and boosts its retail presence.

Comcast is just scaling up its Xfinity Mobile business, but the fact that it reported higher post-paid phone net additions than Sprint during the quarter puts it on the map. The service may have a limited portfolio of phones, mostly late-model flagship handsets from Apple and Samsung, but these are the devices that sell. Furthermore, Xfinity Mobile recently began a "bring your own phone" programme, allowing certain unlocked phones to be used for its mobile service. For now, only iPhones are eligible, but we expect the scheme to extend to phones from other manufacturers.

Comcast is making it easier and more affordable for wireless subscribers to switch from other service providers. The pricing of Xfinity Mobile is very competitive, with unlimited plans available for $45 a month for a single line. Verizon, for example, charges $75 for the first line, but the price goes down to $40 per line for four or more lines.

During the fourth quarter, Verizon enjoyed phone post-paid net additions of 431,000; AT&T posted 329,000 and T-Mobile reported 891,000 — it was a strong period for the US market. Nonetheless, the big four US carriers are aware that Comcast can soon reach critical mass as it starts to keenly promote Xfinity Mobile. Charter Communications, the second-largest cable company in the country, will also soon launch its mobile virtual network operator service.

The US wireless market is changing and will look quite different several years from now. The big four players will need to adjust to life with more post-paid rivals with new business models.

This entry was posted on February 21st, 2018 and is filed under Services. You can follow any responses to this entry through the RSS 2.0 feed or you can leave a response.

Posted By Raghu Gopal On February 21st, 2018

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