Angelakis Has A Rocky Wall Street Debut
Comcast Stock 10% After Cable TV Operator Cuts Guidance
By Mike Farrell -- Multichannel News, 12/5/2007 5:57:00 AM
New York – Comcast co-CFO Mike Angelakis’ debut before the investment community was marred by a precipitous drop in the stock, fueled by the nation’s largest cable operator’s decision to reduce financial guidance for the full year.
Comcast shares tumbled more than 10% ($2.14 per share) in afternoon trading Wednesday to $18.59 each.
Comcast drove down most of the cable sector – Time Warner Cable dipped 5.4% ($1.45 per share) to $25.60; Cablevision Systems was down 5.7% ($1.52 each) to $25.37 and Charter Communications fell 1.6% (2 cents each) to $1.23 per share. Only Mediacom Communications reported a gain – 29 cents (6.5%) to $4.75 per share in afternoon trading.
Angelakis, who will become sole CFO in January, has been slated to kick off the last day of the UBS Securities Media & Communications conference here for weeks. Last night, Comcast issued a press release stating that it will reduce full year 2007 revenue growth guidance from 12% to 11% and operating cash flow growth guidance from 14% to 13%. Free cash flow will also take a hit, Comcast said. It said Tuesday that it expects free cash flow to be approximately 80% of its performance in 2006, compared to previous estimates of 2007 consolidated free cash flow of at least 90% of 2006.
In addition, Comcast said it would add about 6 million revenue generating units (a combination of voice, video and data subscribers) for 2007, below the previously forecasted 6.5 million additions.
The company also said that it will increase capital expenditures by about $300 million for the full year.
At the conference, Angelakis, former managing director at private equity giant Providence Equity Partners, said the decision to take down guidance was made with his presentation in mind.
“As we had more clarity on the numbers, we felt it was important to have a really honest dialog today; it was the right thing to do to issue the release,” Angelakis said.
Comcast had hinted that the year may not go as originally planned during its third quarter conference call with analysts in October. At the time, chief operating officer Steve Burke said that a weak economy, sluggish new home starts and competition from telephone companies and satellite TV provider all were weighing on results.
Angelakis said that Comcast began seeing a slowdown in the business toward the end of the third quarter. He blamed the sluggishness on an uncertain economy, poor housing starts and a slight increase in bad debt and churn.
“One of the first metrics we use is homes passed. If that number isn’t growing, or there are vacancies within homes passed, our business is clearly going to get affected,” Angelakis said, adding that small increases in bad debt and churn indicate “that this is not a robust economy.”
While cable has always been considered to be “recession proof” – consumers strapped for cash would be more likely to stay home and watch TV rather than spending money for other forms of entertainment – with the addition of products like high-speed Internet service and telephone service, that apparently is no longer the case.
To combat that, Comcast is introducing a lower priced, lower speed data service targeted at both customers that are undergoing financial pressures and to entice more dial-up customers to convert to high-speed service.
“By us putting in a lower priced, lower speed tier, that’s one of many tactics we’re looking at to try to deal with retention as well as try to grow RGUs,” Angelakis said.
Angelakis said that like other cable operators, Comcast also is investigating the viability of a double play offering of high-speed data and phone to non-video customers. But he said after his presentation that it is unlikely that Comcast will follow the lead of Charter Communications, which on Tuesday unveiled a $69.97 triple play package consisting of broadcast basic video, voice and data.
Comcast also will devote a good portion of its energies to rolling out advanced set-top boxes, such as HD-DVRs. Angelakis said that a big part of the additional capital expenditures for the year will be for HD-DVRs. He added that Comcast also will spend about $40 million to $45 million on Insight Communications – it is expected to complete the unwinding of its 50-50 partnership with Insight in January – and on Patriot Communications, the New Jersey cable operator Comcast agreed to purchase earlier in the year.
Angelakis also shed some light on Comcast’s decision not to participate in the upcoming Federal Communications Commission auction for 700 MHz wireless spectrum. Comcast already owns wireless spectrum through its participation in the cable consortium SpectrumCo, which was a big buyer of wireless licenses in the AWS auction last year.
“When we think about wireless, we think about what would be the right customer experience,” Angelakis said. “We think about what would be the right product strategy and how does that strategy integrate with our existing products. Then we think about what’s the best technology to do it to create that product and deliver it to that customer and lastly, how does the business case become attractive from a revenue generation perspective. I don’t think we solved those issues.”
Programming Costs
05/04/2009Cover Story: Cash Business
09/06/2009Comcast Reports Strong Q1 Cash Flow
04/30/2009Comcast Delivers Mixed Results In Q2
08/05/2009Comcast Gets Hammered on Wall Street
12/05/2007
