Q3 '25 Earnings - Verizon, Comcast, and Charter - The Problem Children

Full Transcript

Don Kellogg 0m10s

Hello, and welcome to the two hundred and sixty eighth episode of The Week with Roger, the conversation between analysts about all things telecom, media, and technology by Recon Analytics. I'm Don Kellogg, and with me again is Roger Entner. How are doing, Roger?

Roger Entner 0m22s

I'm good. How are you?

Don Kellogg 0m24s

Good. We're wrapping up earnings this week. So we've got Verizon, Comcast, and Charter to talk about. Who do you wanna start with?

Roger Entner 0m32s

Well, let's start chronologically, which would be Verizon. Verizon has a new CEO, Dan Schulman, who introduced himself and all these things. You know, for the people who read my introduction to Dan, and this means Ward research note, were not surprised what Dan was talking about, being more customer friendly, easier to work with, you know, all of these things. But when we look at the performance, the last quarter under Hans, it was less catastrophic than I thought it would be. Business had an okay quarter.

Roger Entner 1m8s

Typically, consumer doesn't do well, and then, you know, people who listen here say like, oh, and business saved the day again. Business did not save the day, they had like 50,000 net adds. They lost customers on consumer, which was bad because now if Verizon wants to have a positive net add year, it has to add like almost 500,000 net adds. And Dan said that he wants you to be financially responsible. Last time they did, what, 400 and change thousand and they were not financially responsible.

Don Kellogg 1m43s

Well, that's the thing with Verizon though, like the first three quarters of the year, they're very financially disciplined. And then they they realize they're gonna miss the year in q four. It's a fire sale and everything must go.

Roger Entner 1m53s

Yeah. Right? But we'll see what happens this year.

Don Kellogg 1m56s

Yeah. I mean, we see it in the in the iPhone stuff. When the iPhone comes out, all the Verizon people comes out in q three and the Verizon people all wait in q four because they know they can get a smoking deal at the end of the year, right?

Roger Entner 2m6s

Yeah, either Thanksgiving or before Christmas. But the hole is deeper. Also, revenue went down. And Hans wanted to be measured on service revenue growth, on EBITDA margin, and on free cash flow, and he was failing on that. And I think the board finally, after us talking here about for years, that raising prices on fewer and fewer customers is not a winning proposition, they finally agreed with it.

Roger Entner 2m37s

I call this like a death loop. And by the way, I'm glad Verizon now recognized they have to get out of that death loop. To its great credit, Comcast talked about it yesterday when they said like, we're no longer going to raise prices on fewer and fewer customers, which I thought was awesome. It wasn't awesome for the stock price, but it's not a winning proposition. And then Charter today was like, oh, our customers and the people don't recognize what an awesome network we have.

Roger Entner 3m9s

Well, I think the problem is customers recognize what an awesome network Charter has, and at least on the fixed side, they're rejecting it, right? That's why they're losing customers. In the earnings presentation, they have this whole comparison chart of like, here's Charter, here's T Mobile, here's AT&T, here's Verizon, and they're all more expensive than we are. Here's our promo thing, and here's our sustained price. And the implicit thing is like, why don't people love us?

Roger Entner 3m40s

But the killer, what I don't get, is like, yes, the introductory rate is $100 versus however expensive the other guys are. And then the sustained rate is 145, if I remember correctly, which is still below what everybody else has. And we know customers hate exploding prices. So why are you not taking a little bit more money and simply say we're not going to raise prices on you? Because that's what people hate.

Roger Entner 4m8s

But no, you're doing what people hate and are surprised that they don't love you back.

Don Kellogg 4m14s

The reality is is that you can run that playbook if you're the only game in town.

Roger Entner 4m18s

Yeah, but that changed.

Don Kellogg 4m20s

But they're not anymore. They're not anymore. Right? And now we're seeing kind of the downside to that playbook, which is, you know, if you can go in on your out in your lunch break and get an FWA box and test it out in twenty minutes to see if it works and it's half the cost of what you're paying for cable, that's probably a pretty good idea.

Roger Entner 4m36s

Yeah. And just wait until all the wireless carriers are going to bundle prepaid with a prepaid FWA for less than the $100 that the promo rate is for cable. That's when things are going to get really fun. So anyway, coming back to Verizon, sorry for jumping around. You know, Dan wants to have a wholesale change in corporate culture, all of these things.

Roger Entner 5m3s

You know, it's going to be interesting because Hans was like so explicit about being Verizon two point zero, and Dan's speech there was a whole repudiation of that. I hope that Verizon is going back to the Verizon one point zero of Denny's days, Denny Strigo. And people of the show know I love Denny Strigo. He's awesome. He led this company, and the company under Denny was like fantastic.

Roger Entner 5m34s

And when Denny retired, the company lost its way, you know, and as the version number went up, the more it lost its way. And they need to find their killer instinct back, and it has to be different because, as Dan correctly pointed out in his earning call, having a great network is table stakes. And I've been telling Verizon for ten years, you know, network parity is coming and it's more or less here, and Dan acknowledged it. So it's all about what are you gonna do with that network? And nobody's talking about that, neither Verizon, AT&T, or T Mobile.

Roger Entner 6m13s

T Mobile is now playing the Verizon one point zero game of, oh, we have the best network. Okay. Wonderful. But what am I

Don Kellogg 6m21s

doing The best with network for what?

Roger Entner 6m23s

For what? The best network

Don Kellogg 6m24s

for what? Exactly. Okay.

Roger Entner 6m27s

You're worshiping the five gs standalone totem pole there. Congratulations. The other ones are have it now back and consumers are saying five gs standalone what? Right? How is this gonna work?

Don Kellogg 6m41s

Well, I think it's working for T Mobile right now, right?

Roger Entner 6m44s

Oh, yes.

Don Kellogg 6m44s

In my mind, the problem for Verizon is they don't have a full spectrum offering. Or they do, but they're not they don't talk about it. Right? So, like, you can come in on a metro plan and then graduate to a essentials plan on postpaid and then work your way all the way up to the most expensive plan in the whole freaking industry and never leave the carrier.

Roger Entner 7m3s

Which is actually also a really awesome plan. Right. And I think it's actually too cheap what they're doing. But you're absolutely right. I view as different price points as upsell opportunities, and they're failing in this upsell opportunity.

Don Kellogg 7m19s

Well, I don't know. I mean, their subscriber count goes down, but their, you know, ARPA goes up. Yeah.

Roger Entner 7m24s

Okay.

Don Kellogg 7m25s

They're running some people up the flagpole here, but on balance, they're losing more people than they're gaining is the problem.

Roger Entner 7m30s

Yes. But I'm really looking forward to see what Dan is gonna do. One of the things is a youth centric plan. Nobody really has a youth centric plan.

Don Kellogg 7m40s

Right. So say more about this. This is something that's pretty common in Europe.

Roger Entner 7m43s

Yeah. It's pretty common in Europe where you give people under the age of, what, 27, a break, which is, by the way, not bigger than what you get in a regular promotion. They throw in some pixie dust and some loyalty program type add ons. And when you make decent money, you pay a decent amount in terms of your MRC. Verizon has to be sexy again, and the youth centric plan would be for them.

Roger Entner 8m14s

Like, they have the biggest gap there, right?

Don Kellogg 8m17s

Well, I mean, every carrier has these 55 plus plans. And when you look at 55 plus folks, those folks are the least likely to buy any of the new stuff or, you know, upgrade their phones or anything else. So you're giving people a discount that have presumably lower lifetime value than the rest of the base as opposed to younger consumers are the ones that do wanna try new stuff. They do wanna get add ons. They do wanna get devices attached to all this stuff.

Don Kellogg 8m40s

And so the incentive there is totally bonkers upside down.

Roger Entner 8m43s

And the family is gonna get bigger. Right?

Don Kellogg 8m46s

And they're gonna be around for forty years, right, as opposed to twenty.

Roger Entner 8m49s

I hope more. Right? Right. Yeah. I know I'm not gonna be around for another forty years.

Roger Entner 8m54s

No.

Don Kellogg 8m56s

We'll see. I don't know. AI is helping out healthcare. We'll see.

Roger Entner 8m59s

I don't think I will enjoy the last 10 of those forty. But yeah. And then you have cable, right? Both Charter and Comcast lost 100,000 home Internet customers. Comcast now lost also that overseas, and they made both record mobile net adds of, like, 400 and change thousand.

Don Kellogg 9m20s

Comcast had four fourteen. Charter had four ninety three. Right? But I mean, like, my my reaction to this is that

Roger Entner 9m27s

Enjoy it while it lasts is mine.

Don Kellogg 9m29s

Yeah. Well, it's amazing what people will take when you give it to them for free.

Roger Entner 9m32s

Well, yeah, but you only give them for free for a year. And so the net adds numbers are holding up. So not everybody is jumping ship after that one year. The argument of, oh, it's amazing what people do when you give it for free, was true for the first year. But we're now in, like, what, year three of that?

Don Kellogg 9m52s

Yeah. But if you do the math on the penetration of the base with wireless plans, there's still a lot a lot of folks left to give free phones to. Right?

Roger Entner 10m0s

Well, absolutely. But I'm saying, you know, people are coming in the door, but people are also exiting.

Don Kellogg 10m5s

The fact remains you don't want your lead in product that people actually pay good money for to be losing subscribers while your product that in many circumstances is free to be gaining subscribers, right? That's not a recipe for success.

Roger Entner 10m18s

But you know, 2026 will be such an exciting year because when you look at it, how this is set up, you have Dan Schulman who said, I'm no longer the hunting ground of the other guys, which was a much nicer way than what I wrote, which was that feeding trough, right? So we're no longer your hunting ground, we wanna be back where we belong, which is number one, right? We wanna do all of these things. Diana's saying that

Don Kellogg 10m46s

That's a key point. They're gonna be number two pretty soon to T Mobile in terms of total subscriber count in a couple quarters if they don't watch out.

Roger Entner 10m54s

Yeah. We'll see. Do the math. Okay. We'll do math, you know.

Roger Entner 10m59s

We're reasonably good at that. You know, you have Srini Gopalan coming in as the new CEO. Mike Sievert just left the party, and he needs to keep the party going, right? Otherwise, everybody's gonna point at him and say, like, you know, what the heck happened here? Mike, the DJ, left and the music stopped.

Roger Entner 11m20s

So he's gonna try his hardest to keep that going too. And then you have AT&T getting a lot more aggressive and a lot more successful. Look at that ad campaign where they accused T Mobile for being caught lying 16 times, and then the NAD said you can't use that. And then in true AT&T fashion, they sue NAD, right? Okay, not sure I would do that, but okay.

Roger Entner 11m45s

But you see how they're fired up to fight, and they're sick and tired of T Mobile playing, you have to give it to them at times fast and loose with some of the things, and the other guys haven't pushed back. So I expect a lot more pushback, and here I think this is the opening salvo, not the end of that battle where they're now going mano a mano with T Mobile. And then you have the cable guys who, on one hand, kick ass and take names in wireless, and they're being beaten around the block on wireline. And I think this is going to get worse too, and it only can come here. So 'twenty six is going to be epic.

Roger Entner 12m31s

And by the way, stock prices have been under pressure because all of these guys have been like, you know, it was the headline, at least on the internal paper, of when Dan takes over, where I said like, this means war. And I had my, like, my inner box bunny in my head.

Don Kellogg 12m46s

So here's the math on the total subscriber number. Right? So T Mobile has a 139,000,949, give or take a few.

Roger Entner 12m53s

Give or take a few.

Don Kellogg 12m54s

Give or take a few subscribers. Right? Verizon has a 146,000,000. Right? T Mobile gained 2,300,000 subs this last quarter.

Don Kellogg 13m3s

Right? So if they continue at this pace in three or four quarters

Roger Entner 13m7s

By the end of the year, Sweeney can Yeah.

Don Kellogg 13m10s

'26, Verizon could be overtaken by T Mobile in terms of total branded subs.

Roger Entner 13m14s

You know, and we're gonna have a dance party at the earnings call and we can watch it on video, on YouTube, you know, when they become number one. And then they're all going to say thank you to Sweeney for seeing it through, to Mike for setting it up, and to John Ledger to put down the foundation, right? And by the way, it was very nice seeing all three of them together at the Hall of Fame dinner for Neville Ray. And so all three generations of CEOs were there, and it was the first time that John Ledger came out since he retired for Neville. So that was very, very nice, and it was good seeing John.

Roger Entner 13m52s

But yeah, that's their goal, right? I would expect for the end of Q4 'twenty six, they want to be number one in The US. So this sets up such an epic battle for next year.

Don Kellogg 14m4s

Well, Dan's got his work ahead of him too, right?

Roger Entner 14m6s

All of them. And you have a new CEO of the consumer and platforms business, and he has put his team together, and they're making changes. I don't think this is the old Comcast. Well, it's still the old Comcast, but there are a lot of new people in there, and it will be very interesting to see if they can put all the plans into action that I think they're plotting, because they're realizing, and I give Comcast so much credit for that, that they realize, you know, this dog isn't hunting anymore. We need to do something different, and they're putting different people in place.

Roger Entner 14m43s

You know, friend of the show, Jonathan Chaplin, is running strategy now for the consumer communications and platform group of Comcast. You can read his old reports of how complementary or not complementary he was about Comcast. Now he runs strategy, you know, strategy doesn't have a business thing, but he now is at least in the room and can give a lot of solid advice that he wrote while he was at New Street Research. So if anybody wants to do opposition research, I would highly recommend reading everything that Jonathan wrote over the last three years on how Cable could do a better job for a hint of what he's gonna advise internally. And I think they hired him because they're like, yeah, you know, the guy could help us, right?

Roger Entner 15m29s

Rather than, you know, this guy is smoking something.

Don Kellogg 15m32s

We'll see, we'll see. It'll be interesting either way.

Roger Entner 15m34s

And Jonathan's a smart guy. And so it will be a very, very interesting Q4 because they all have something to prove. And it will be an even more interesting Q1.

Don Kellogg 15m46s

Yeah. Well, I mean, they're already, you know, some of these guys are already in deep trouble, right?

Roger Entner 15m50s

Yeah. And there will be blood on

Don Kellogg 15m51s

the floor. Comcast stock has lost half its value year to date.

Roger Entner 15m56s

Yeah, exactly. And that's why they have new people in there. But there will be blood on the floor. People will slip. Some of them will stab each other and some will stab themselves.

Roger Entner 16m5s

It will be fascinating. When people say like, oh, this is a boring industry, I'm like, you have no idea. You're not paying attention if you think this is boring.

Don Kellogg 16m13s

Well, we've gotten to the point where there's just apex predators left, right? So we'll see who the apex of the apex is, right? Exactly. My money is on wireless over cable, but we'll see.

Roger Entner 16m23s

I worked a lot with cable. And once they stop being their worst enemy, they're gonna be really good. They played their cards, I think, poorly. They could be a lot better than they are. But they're still so in love with themselves, and that stands in the way.

Don Kellogg 16m39s

Well, problem, that's right? It's fiber and FWA are not going away.

Roger Entner 16m42s

Yeah. And by the way, all the cable guys, when they build something new, it's fiber, right? But yeah, no, as I said, I give Comcast so much credit for basically switching out that whole leadership team.

Don Kellogg 16m56s

All right, my friend. We'll keep an eye on it. Talk to you next week.

Roger Entner 16m59s

Talk to you next week. Bye.