Comcast Execs: Sky Deal Will Ensure Cable Dominance As Connectivity Revenue Continues Double-Digit Climb

Comcast, soon to be combined with Britain's largest pay-TV broadcaster Sky, will become a broadly diversified, global leader across broadband, video, content and distribution, top executives for the cable giant said Thursday.

Comcast in September finally outbid 21st Century Fox in its months-long battle over Sky, paying $38.8 billion for the European content leader. Sky operates from a position of strength in attractive markets, which is why the bidding process was so competitive, Comcast Chairman and CEO Brian Roberts told investors during the company's earnings call Thursday.

Following Comcast’s third-quarter financial results, Sky CEO Jeremy Darroch joined the Comcast team to discuss the combined company's market position and growth potential. Darroch said he intends to continue in his post at Sky after the deal is complete.

Together with Comcast, Sky triples the footprint of homes that can be directly sold TV products to nearly 200 million, and it will just about double Comcast's broadband footprint, according to the two companies.

"We think Sky is an incredible and unique stand-alone business that fits perfectly with Comcast," Roberts said. "When you combine NBC broadcast and cable channel portfolio that will now include Sky-branded entertainment, sports, movies and news channels, we become the leader in viewership share across all four primary pay TV geographies. And all of this is built around subscription-based, recurring revenue businesses, which has allowed us to grow EBITDA for 23 straight years."

[Related: Comcast Backs Out Of Bidding War Over 21st Century Fox To Pursue U.K. TV Provider Sky]

Despite the Sky acquisition taking up a lot of bandwidth during the third quarter, Philadelphia-based Comcast is still very focused on its core businesses, including its healthy cable and connectivity services portfolio. Overall, cable communications revenue climbed 3.4 percent to $13.79 billion during the third quarter ended Sept 30, up from $13.34 billion in the third quarter of 2017. Comcast attributed the growth to increases in the company's high-speed internet, business services, and robust political advertising spending.

"Higher-margin connectivity is definitely helping to drive margin and cash flow," Roberts said of the growth.

Comcast's continued success in its cable communications segment is also being driven by going deeper with existing customers. Revenue per customer increased by more than 4.4 percent during the quarter.

Comcast's business services revenue once again shined with double-digit growth, jumping 10.6 percent to $1.80 billion in the third quarter compared with $1.63 billion in the same quarter a year ago. Small- and midsize-business customer growth continues to drive the profitability of Comcast's business services segment, but the cable provider also continues its push to bring on more enterprise customers, said Michael Cavanagh, Comcast's senior executive vice president and CFO.

The provider added 30,000 new business customers during the quarter.

High-speed internet rose 9.6 percent to $4.32 billion, up from $3.94 billion a year ago. Roberts pointed to a "real appetite" for better broadband, speed and coverage as the reason for the segment's growth. For third-quarter 2018, Comcast added 363,000 net-new high-speed internet customers.

Voice revenue, on the other hand, dipped 3.1 percent from $1.0 billion last year to $982 million during the third quarter.

On the wireless side, Comcast's wireless initiative, Xfinity Mobile, is available to residential broadband internet subscribers as part of a bundled offering today. Comcast said that its financial results include a loss of $178 million from the wireless segment. Xfinity Mobile posted a loss of $161 million during the same quarter last year. The segment added 228,000 lines in third-quarter 2018 and has about 1 million lines total.

Cavanagh said that the loss reflects increased costs associated with scaling the service. Comcast has not yet made Xfinity Mobile, which has been available for about a year and a half, available through the channel.

"We are pleased with our progress in mobile, and while it's still relatively early, the results we see are supportive of our key objectives when we entered the wireless business, including deepening the relationship with, and improving the retention of, broadband customers," he said.

Revenue in the first quarter increased to $22.14 billion, up 5 percent from $21.08 billion in the year-ago quarter. Net income in the quarter was $2.89 billion, up 9.3 percent from $2.64 billion in the third quarter of 2017. The cable giant posted adjusted earnings of 65 cents per share for the quarter, up 27.5 percent over 51 cents per share in the third quarter of 2017.