EUR 850.00 For Business Accounts Only

Morningstar | Comcast Continues to Grab Market Share as Internet Data Consumption Grows

Comcast’s core cable business, which accounts for more than half of the firm’s value, enjoys significant competitive advantages. In addition, the NBCUniversal acquisition has added shareholder value, in our view, through a combination of a reasonable purchase price and strong execution. We aren’t as positive on the Sky acquisition, given the high price paid, but we expect Comcast will use this asset to enhance NBCU’s competitive position. In short, Comcast has built a solid wide moat, in our view.Comcast has steadily gained market share over its primary competitors, phone companies like AT&T and Verizon, as high-quality Internet access has become a staple utility in more households. Over the past five years, we estimate the firm has increased Internet access market share in the areas it serves from about 55% to 63%, with share coming nearly entirely from the phone companies. While that share shift may seem modest, it implies that Comcast’s customer base in a given area is now more than 60% larger on average than its rivals’, up from around 20%. With a network than can be upgraded at modest incremental cost, we expect Internet access share will continue to shift in Comcast’s favor, enabling the firm to gain additional scale efficiencies. The high-margins on Internet access should offset the decline in the traditional television business, where margins have already plunged in recent years.Comcast has managed NBCU exceptionally well, more than doubling cash flow since the 2011 acquisition. The firm has invested aggressively in content, building solid franchises and improving the performance of both the broadcast network and the movie studio, while also greatly expanding the theme park business. The television business is clearly evolving, which will present challenges for NBCU, but we believe it has the breadth of assets to compete effectively. Adding Sky’s capabilities outside the U.S. brings another dimension to Comcast’s ability to create and distribute content, which should enhance the firm’s ability to place content in the most lucrative venues, helping attract top talent.