The September conference cycle is never dull and always full of interesting tidbits for those who really listen to the undercurrents of what CEOs and CFOs are saying. I have found that history has shown this time and time again in 20+ years of going into “September listening mode.”
One of the key themes this past month came from the cable sector. In short – cable may be down…but they are sitting back up. Comcast stock has struggled to find its footing since September 14th when its CFO previewed that broadband adds would be less than Street estimates. Specifically he noted they have seen a slowdown since late August in Broadband adds and growth would be down from the (record) Q3’19 levels. ATUS also previewed weaker than expected Q3’21 adds – now guiding to 15K – 20K in broadband losses (with plan to finish flat / slightly up on net adds for FY’21). Its stock has also felt some pain – down approximately 25 percent since September 1st.
The question is what is driving this weakness for cable? The CMCSA CFO acknowledged the times in the competitive front are indeed a changin’. Specifically he noted: “we’ve been mindful that competition’s coming in one of our best and favorite businesses, frankly, for quite some time.”
One of the things we have often discussed in our write-ups is that telecom has very much “woken up” to the need for more fiber. When telecos were not as much focused on broadband and fiber-deep, life was very good for cable. When I was an analyst one of the things I used to say was ‘never underestimate the cable cos’. Two years later, we would continue to say this.
In the September webcasts from the cable cos there seemed to be very purposeful messaging being sent. Perhaps this was best seen by listening to the cable Godfather himself, Brian Roberts (Chairman and CEO of Comcast). When asked about the balance sheet at the Goldman Sachs conference he made a notable point. Specifically, he said: “You’re going to have a lot of free cash flow and your first goal would be to invest in the business.” This tails off some comments from the CFO two weeks prior who noted: “We’re going to step on the gas a little bit….and continue to invest in the network on the path to DOCSIS 4.0 which will give us multi-gig speeds up and down.” This was not surprising, but what was surprising was the follow up to this statement. He went on to say: “no, no, no trigger other than that’s the path we want to get our business on and with the success of trialing 4.0 technologies in the last bunch of months….its for real and we want to get ourselves on the path to doing that.”
The “no other trigger” seems hard to me. The trigger is kind of hiding in plain sight, isn’t it? In the last nine months, AT&T, Frontier, Windstream, Consolidated, Lumen, Apollo and many many other smaller players (too many to list) have been spreading the “fiberized” gospel. And this will only be entering hyper-drive mode as a massive amount of broadband infrastructure capital enters the states’ pockets.
My guess is the history books will show that this past month will indeed be a “September to Remember” because it will mark the point where cable showed they are not backing down. They may have been hit, but they are no shrinking violet and if telecom is moving, cable is saying “game on – we are ready!”