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Cable analysts: Broadband a 'key driver'; growth to continue amid 5G competition


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Cable analysts: Broadband a 'key driver'; growth to continue amid 5G competition

As the fast-changing cable landscape enters a new year, analysts expect broadband to remain a focal point for cable companies in 2020, even as they face new competition from wireless operators' next-generation 5G services.

"Broadband connectivity has become the key driver for US cable operators," Vijay Jayant — head of Evercore ISI's cable, satellite and telecommunications research team — said in a 2020 communications services outlook report.

In line with trends for 2019, Jayant expects 2020 to be marked by "modest overall subscriber growth, and continued share expansion by cable operators, due to ... their superior competitive position in a large portion of the country when compared to slower telco DSL products."

Jayant also expects cable companies to make inroads in the wireless industry.

"In terms of share, we expect cable operators to continue to grow their footprints, capturing 46% of industry postpaid phone net additions, up from 33% in 2019E," he wrote.

Major cable operators including Comcast Corp., Charter Communications Inc. and Altice USA Inc. have launched mobile offerings that leverage the companies' network of Wi-Fi hotspots as well as mobile virtual network operator agreements with major wireless providers, such as Verizon Communications Inc. and Sprint Corp.

While cable companies are expected to increase their share of the wireless industry, MoffettNathanson analyst Craig Moffett wrote in a 2020 preview that wireless operators' 5G offerings could also be crucial competitors for cable operators in the broadband market.

"Just as competition from Cable is likely to be the most important factor facing the Wireless operators, so, too, is competition from the wireless operators likely the most important factor facing the cable companies," he wrote.

In particular, Moffett notes that the prospect of Verizon developing a competitive 5G fixed wireless broadband service "shouldn't be entirely dismissed," despite the fact that 5G Home, Verizon's in-home fixed wireless broadband offering, thus far has not received great reviews in the select markets where it has launched. Verizon's early 5G offerings relied on millimeter wave spectrum, which, due to its tiny wavelengths, poses challenges for deployment outside of small pockets in dense urban areas.

"The threat to Cable from 5G fixed wireless broadband very likely won't come from millimeter wave spectrum," Moffett said, though other spectrum bands are on the horizon for the company, and Verizon's engineers, the analyst noted, "are very good."

Looking at the just-ended fourth quarter of 2019, analysts are also optimistic that large cable operators will continue to grow their broadband businesses.

TD Securities analyst Bentley Cross wrote in a fourth-quarter preview for Charter that he expects net additions of 305,000 residential high-speed internet subscribers for the quarter, which would result in 5.4% year-over-year growth from 289,000 in the year-ago period.

Cross also expects residential internet revenue to grow 10.3% year over year, to $4.3 billion, up from $3.9 billion.

Turning to Comcast, Matthew Harrigan, equity research analyst at The Benchmark Co., wrote in a Jan. 17 research report that he expects Comcast to gain 370,000 broadband customers for the quarter, with video customers declining by 160,000.

Harrigan also expects high-speed internet sales to increase 9.4%, with video declining 1.5%.

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