By most any metric, the recent round of earnings reports for service providers was unlike any others, but we're prepared to declare Charter as the hand-down winner.
While AT&T, Verizon, and Comcast saw their bottom lines sink in the recent round of earnings reports, Charter Communications stood tall. Due to the coronavirus pandemic, AT&T, Comcast and Verizon were hit particularly hard in their media sectors, which included closing down retail stores, a lack of sports-related revenues, shuttering theme parks, and losing movie release revenues.
It wasn't that long ago that adding media content was considered essential for companies such as Comcast, AT&T and Verizon. Those efforts, and investments, haven't always panned out. (Ask Elliott Management about AT&T's media investments.)
On the other hand, Charter stayed close to its cable operator roots by buying up Time Warner Cable and Bright House Networks, who were kissing cousins on the technology front. Those deals brought subscribers across key areas, such as New York City and parts of Florida, into the Charter fold.
In the second quarter, Charter reported revenue of $11.7 billion, which was a 3.1% year-over-year increase. Charter's net income for the quarter was $766 million, or $3.71 per share, compared to $314 million ($1.41) per share in the same quarter a year ago.
Charter's second quarter residential and small- and medium-business (SMB) internet customers increased by 850,000, compared to 258,000 during the second quarter of 2019.
Out of that total, Charter signed up 842,000 residential internet subscribers in the second quarter versus 221,000 residential internet additions in the same quarter a year ago.
All of which led to Moffett Nathanson analyst Craig Moffett to say it was "hard to find an argument for excluding Charter from the ‘Covid winner’s club.’”
Out of the 842,000 new internet additions, about 254,000 were new customers stemming from promotions and discounts related to Covid-19 through the FCC’s Keep Americans Connected pledges. By contrast, Comcast had more than 600,000 high-risk or free Internet Essentials customers during its Q2, but didn’t include them in its quarterly subscriber count.
Overall, Comcast reported revenue of $23.7 billion, a decrease of 11.7% year over year, while adjusted earnings per share decreased 11.5% to $0.69.
Although the second quarter financials reflected strong results in cable, those results were more than offset by declines in other parts of Comcast’s business, primarily at NBCUniversal, and costs associated with its new Peacock streaming service.
Minus the Covid-19 related customers, Comcast Cable added 323,000 high-speed internet customers in its second quarter 2020, which was its second best quarter in 13 years,
In its second quarter, AT&T posted revenue of $41 billion, which was down from $45 billion in the same quarter a year ago. In the second quarter, AT&T took an estimated $2.8 billion hit from the pandemic due to a lack of live sporting events and the cost to protect its employees, among other factors.
Due to Covid-19, Verizon's second quarter earnings were marred by lower consumer wireless service revenue, which was down 2.7% from a year ago, and a 24.5% drop in revenues for Verizon Media.
Along with lower device sales, Verizon CEO Hans Vestberg said those factors were the primarily culprits for second quarter earnings being impacted by 14 cents during the coronavirus pandemic.
Verizon posted a year-over-year decline in revenue from $32.1 billion to $30.4 billion in the second quarter. Verizon's net income was up in the second quarter from $3.9 billion a year ago to $4.7 billion.
The constant refrain for service providers, and politicians, has been "no one ever imagined something like the Covid-19 pandemic," which is true enough. But in the gold rush to scoop up more media assets—"Content is king!"—AT&T, Comcast and Verizon's bottom lines were more vulnerable than Charter's.
As for next quarter's results, it's anyone's guess due to Covid-19, but there will be tailwinds related to political advertisements.