Comcast Corp. / Charter Communications, Inc.: A deeper dive on a potential Comcast+Charter scenario

Research evidence excerpt

Comcast Corp. / Charter Communications, Inc.: A deeper dive on a potential Comcast+Charter scenario

Barclays | Comcast Corp. / Charter Communications, Inc.

We estimate Sky’s broadband/wireless connectivity revenues to grow to $5.4bn in 2027E based

on reported trends (vs $3.4bn reported in 2022). For the other businesses under Sky, we assume

~2% negative revenue growth based on our estimates of video accounting for the largest share

of this bucket and benchmarking against S&P Capital IQ estimates for satellite video industry

declines in the UK. Based on this, we estimate overall ~$15.7bn revenue for the Sky connectivity

business in 2027E.

Based on past disclosure3 , we estimate revenue breakdowns for Sky’s international connectivity

business assuming two-thirds of the revenue comes from broadband and that wireless device

revenues account for 60% of the balance overall wireless revenues. Assuming 25% margins for

Sky’s broadband business (lower than BT Consumer, given the larger scale at BT and its larger

play in fiber), break-even on wireless devices and 10% margins on wireless service revenues

(assuming low service margins given MVNO nature and limited scale), we estimate Sky to

generate overall margins of ~18% on these broadband/wireless connectivity revenues in 2022.

Assuming 18% margins for the broadband/wireless connectivity business as laid out above, and

using the reported overall ~12% margins for 2022 for the Sky cable business, we get to ~10%

margins for the balance other businesses at Sky for 2022. Assuming margins continue at similar

levels in 2027E for Sky’s connectivity and other segments (18% and 10%, respectively), in line

with trends at other UK telcos, we estimate overall margin improvement to ~13% due to a more