For investors in wireless giants AT&T, T-Mobile US and Verizon Communications, 2023 has brought more grief amid slowing growth. But wireless growth in cable TV firms like Comcast is showing signs of life. And it's showing up in the shares of Comcast stock in particular.
Comcast and Charter Communications captured more wireless market share in the March quarter amid slowing industry growth. Including Altice USA, cable firms grabbed 75% in new postpaid subscribers, or customers that spend the most on phone service.
Will they do it again in the second quarter? Wall Street analysts estimate that AT&T's growth in postpaid phone subscribers during the period will drop 62% compared with the year-earlier period. Verizon is expected to actually lose 1,000 postpaid subscribers versus a gain of 12,000 last year. And additions for T-Mobile will be only slightly higher.
Meanwhile, Comcast's additions of postpaid phone subscribers will rise 7%, analysts estimate, while Charter's is expected to surge 75%.
"In the fully saturated wireless phone market, subscriber growth is close to a zero-sum game," SVB MoffettNathanson analyst Craig Moffett said in a recent note to clients.
"Cable's wireless ambitions have only grown more aggressive," Moffett added. "The sharp declines in stock prices for all of the Big Three (wireless firms), and for AT&T in particular, reflect an appropriately sober view."
Comcast Stock Rebounds In 2023
Heading into June-quarter financial results, investors have been tough on phone companies.
AT&T stock has retreated 16% in 2023 while Verizon has dropped 10%. After outperforming in 2022, TMUS stock is down 5% this year. But a bigger buyback of TMUS stock could boost shares.
Meanwhile, Comcast stock has advanced 14%. And shares have forged a double-bottom base from a technical view, according to IBD MarketSmith.
Comcast bought back $2 billion in shares during the March quarter. That brought repurchases to $12 billion, or 7.2% of shares outstanding, over the past 12 months.
Buybacks at Charter, however, have slowed significantly amid higher capital spending. CHTR stock has dipped 4.5% this year.
How Cable Firms Get In The Wireless Game
Cable TV firms do not operate wireless networks. Rather, they lease capacity on a wholesale basis, mainly from Verizon. That's an offshoot from a wireless spectrum deal that Verizon forged with the cable industry in 2011.
Cable TV firms bundle wireless and high-speed internet services together in promotions. The cable firms utilize their high-margin broadband business to subsidize mobile pricing.
For example, Comcast offers wireless prices well below those of Verizon and AT&T. Comcast now has 5.7 million wireless subscribers after entering the mobile phone business in 2017.
"Comcast is clearly leaning into wireless, recognizing not only that it will be their most important growth driver, but that it also potentially holds the key to churn reduction in broadband," said analyst Moffett.
Meanwhile, Charter has succeeded with free line promotions. Overall, cable TV firms now hold about 5% of the U.S. postpaid phone market, including privately held Cox Communications.
Dish Network Wireless Disrupter?
Gains for Comcast stock and other cable TV firms are just one worry for investors in AT&T and Verizon. There's also the entry of satellite TV broadcaster Dish Network into the wireless business. Its Boost Mobile unit has announced a $25 per month offer for 5G services.
Dish says it has met build-out requirements for its 5G wireless network set by the Federal Communications Commission. Dish's 5G network needed to reach 70% of the U.S., or roughly 240 million people, by the end of June. In addition, Dish faces 2025 network construction deadlines.
DISH stock has collapsed 57% in 2023 amid worries over the financing of its 5G network buildout, rising debt and higher interest rates. Also, Dish on June 23 said Chief Operating Officer Narayan Iyengar has resigned.
However, insider buying could be a possible bright spot for DISH stock. The company in a regulatory filing May 15 said co-founder Jim DeFranco has bought $18.6 million worth of shares in 2023.
Also, Dish shares popped briefly in late May amid reports that e-commerce giant Amazon.com plans to resell mobile phone services in the U.S. through its Prime loyalty program. Amazon provides cloud computing services to Dish's fledgling wireless business.
But Amazon denied that it's partnering "at this time" with Dish as well as the big three wireless companies.
Bigger Buyback For TMUS Stock?
Meanwhile, the troubles for T-Mobile have been muted, compared with AT&T and Verizon. While TMUS stock has retreated this year, T-Mobile outperformed the S&P 500 amid the bear market in 2022. T-Mobile stock gained nearly 21% while the S&P 500 fell more than 19%.
"The bear case for T-Mobile largely revolves around deteriorating fundamentals in the wireless industry as growth slows and competition increases," Morgan Stanley analyst Simon Flannery said in a note to clients. "We expect T-Mobile to complete their existing $14 billion buyback authorization in July or August. We expect the company to announce a new, larger authorization during Q3, potentially in the $18 billion to $20 billion range."
Verizon has delayed a stock buyback because of 5G radio spectrum purchases. AT&T also does not have one. Both AT&T and Verizon, though, offer shareholders sizable annual dividends.
Unlike Comcast stock, AT&T's stock has plunged amid cuts in free cash flow, which support its dividend. Both AT&T and Verizon have been cutting costs.
UBS analyst John Hodulik in a second-quarter preview said: "We look for 9% EBITDA growth at T-Mobile and 6% at AT&T while Verizon sees improved declines."
Comcast Stock: Developments To Watch
At KeyBanc Capital Markets, analyst Brandon Nispel is cautious on telecom stocks.
"Valuations are inexpensive, though we find ourselves unwilling to pound the table on even the highest-quality, least-expensive names without a fundamental catalyst," he said in a note.
For telecom investors, Comcast may have other developments to monitor. Walt Disney may soon buy out Comcast's stake in video streaming service Hulu. Then, there's NBCUniversal's future.
Comcast President Mike Cavanagh is the acting chief executive of NBCUniversal following the departure of Jeff Shell.
There's also speculation NBCU may sell assets or merge with another media firm. That also could impact Comcast stock.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.
