Comcast is a media, entertainment, and communications company offering consumer entertainment, information, and communication products and services to residential and commercial customers. The company operates in two segments: 1) Connectivity & Platforms (2/3rds of revenue) includes broadband, wireless, international broadband, and advertising; and 2) Content & Experiences (1/3rd) includes media, studios, and theme parks.
Wireless and Satellite services continue to be a headwind for cable. Yet, comcast derives a larger portion of revenues from its high-margin broadband internet service. Broadband net adds have normalized following the pandemic and Comcast’s strategy now focuses on average revenue per user (ARPU). Wireless and other residential services are being pushed out as a new growth driver.
After the successful and ahead of schedule integration of Sky, Comcast disposes of a strong balance sheet with net leverage in check after deleveraging from its large-scale acquisition. The average life of Comcast’s term debt is about 17 years with a weighted-average cost of 3.6%. Since Comcast is well on track, speculations were raised that it might pursue another acquisition spree.
While for now the credit outlook is stable, risks in the field of fixed wireless accounts and fiber alternatives are growing. This together with another debt-financed acquisition change unfavorably the credit outlook.
While we see little issuer risk for the highly liquid short-term credit, we take a more cautious approach on longer-term dated bonds which would suffer above average in case of debt-financed deal.