A product Comcast launched 2 years ago was supposed to disrupt AT&T and Verizon's business - now experts see it as something totally different
- Comcast's cell phone service got off to a fast start, but doesn't pose a threat to the wireless market, Cowen analysts say.
- The service, Xfinity Mobile, launched in 2017 and had 1.2 million customers by the end of 2018.
- It turns out Comcast is using the service to retain its existing customers rather than stealing ones from other providers, according to a research note.
When Comcast launched its Xfinity Mobile cellular service in 2017, Wall Street analysts predicted its customer base would soon skyrocket, adding more than 2 million customers a year and stealing market share from wireless providers.
Two years later, that prediction hasn't materialized, despite a strong launch, according to a new research note from analysts at Cowen.
Xfinity Mobile grew to 1.2 million subscribers by the end of 2018. For perspective, Charter, Comcast's closest mobile competitor, ended the year with 134,000 mobile customers. But Comcast fell short of early estimates that it would add 2 million customers a year. The analysts said they see limited threat of wireless disruption.
The mobile virtual network operator, or MVNO, uses Verizon's network to offer Comcast customers unlimited data plans for $45 a month. In their new note, the Cowen analysts say the company isn't trying to grow its share of the wireless market but is trying to win a subset of their customer base.
At an analyst event last week, Comcast CFO Mike Cavanaugh said he expects the pace to remain the same in the year ahead, and Cowen analysts predict Comcast will add 875,000 subscribers in 2019.
That's a tiny share of the total post-paid wireless market, at just 0.6%, compared to Verizon's 41% and AT&T's 29%.
Xfinity Mobile improves customer satisfaction and retention
Comcast has a limited ability to steal customers from other wireless providers because they're going after different customers. The average Xfinity Mobile customer is about 51 years old, compared to Verizon's average of 47 and AT&T's average of 46, according to a survey Cowen periodically conducts on wireless users.
Xfinity Mobile gives Comcast another product to offer customers to keep them subscribing to its high-margin broadband business and video business. Xfinity Mobile subscribers already pay more for video service than AT&T and Verizon customers, according to the Cowen survey, at $107 a month compared to Verizon's $102 and AT&T's $100.
During Comcast's fourth-quarter earnings call, Cavanaugh said the company has seen increased customer satisfaction and improved broadband retention when Xfinity Mobile is attached.
If Xfinity adds 800,000 subscribers in 2019 that would mean about 7% of Comcast's broadband subscribers would also be mobile subscribers. That's a small figure, but one they will want to continue to grow to strengthen their relationship with broadband customers.