Comcast (CMCSA.US) shares plunge 7%; CFO criticizes broadband pricing as "irrational", user losses continue

According to Jinse Finance APP, shares of the American telecommunications and media giant Comcast (CMCSA.US) closed down 6.6% on Wednesday after the company’s Chief Financial Officer, Jason Armstrong, stated that there has been no improvement in broadband user losses this quarter, as competitors are attracting customers with lower prices.

Armstrong revealed at an industry conference hosted by Goldman Sachs Group that competitors are offering gigabit broadband access at monthly rates between $30 and $40, a pricing structure that makes it difficult for Comcast to demonstrate a reasonable return on investment. “For us, that is not a rational price point,” he stated bluntly.

This comment implies that Comcast’s net broadband user losses this quarter may approach last quarter’s 167,000, rather than the 103,000 previously expected by analysts. As a result, Comcast’s stock price closed down 6.6% on the day at $24.59; shares of Charter Communications (CHTR.US), another major internet service provider, fell 8.1%.

In recent years, Comcast has faced fierce competition from other operators, who have been launching bundled packages of home broadband and mobile services to attract new customers and increase loyalty among existing ones. Currently, Charter Communications’ Spectrum brand offers a one-year gigabit home broadband plan for $60 a month; Optimum Communications, which serves areas such as New York, offers a gigabit fiber package for $25 a month. Wireless giant Verizon (VZ.US) offers Fios fiber packages at $30 per month, but gigabit speeds require a payment of $80. By comparison, Comcast’s main Xfinity gigabit internet service is currently priced at $50 a month.

Charter Communications CEO Chris Winfrey acknowledged the pricing pressure in his speech at the same conference on Wednesday. He said, “Competition was intense in the first quarter, the same in the second quarter, and it’s continuing in the third quarter. You’ll see competition among providers ebb and flow—some are using bundled approaches, while others pursue single strategies.”

Philadelphia-based Comcast recently announced plans to separate its media assets from its network connectivity business, but the company continues to struggle with the ongoing loss of cable television and home broadband customers.

Armstrong stated that the company’s EBITDA in the third quarter is expected to show a “modest” improvement, and projected that the broadband user trend over the whole year will improve.

When discussing the theme park business, Armstrong admitted that the “Orlando market softness” that became apparent in the second quarter has continued this quarter. He analyzed, “There are macroeconomic factors at play, as well as other influences such as gasoline and airfare prices—all of which have had some degree of impact on the market.”