Count Jefferies analyst Mike McCormack as a bullish buyer in Comcast’s oft-stated narrative that its X1 video platform is reducing churn and driving what is iconoclastic growth in the linear pay TV business.
“Comcast's versatile platform has driven higher engagement and a better user experience, while the integration of Netflix and YouTube should only further help churn,” McCormack said in a note to investors this morning. “We estimate video churn has dropped more than 20 basis points over the last two years, with every 5% of incremental X1 penetration reducing churn 2-3 basis points. In our view, the higher retention separates Comcast from the rest of the video pack. Notably, since X1 reached 30% penetration in third quarter of 2015, the company has grown market share each quarter, cumulatively adding nearly 300,000 subscribers vs. an industry loss of ~425,000.”
Comcast added 41,000 pay TV users in the first quarter, as the rest of the traditional pay TV business lost over 750,000 users.
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McCormack meanwhile, discounted the notion that Comcast will combine its wireless ambitions with a merger-friendly regulatory climate to go on an M&A shopping spree.
Comcast’s MVNO deal with Verizon “is positioned as a tool to reduce churn or drive customer acquisition, though longer-term ambitions are uncertain,” the analyst wrote.
“Pricing appears rational with plan flexibility providing value to families, though the hand-off efficacy will likely be the biggest determinant of success,” McCormack added. “Comcast’s wireless strategy, including the potential for a new MVNO deal, bears monitoring, and is crucial given shifting consumer behavior. We do not anticipate Comcast to take part in industry consolidation in the near term.”