Cable Operators

Comcast, TW See Strong Q4 Gains

2/06/2005 7:00 PM Eastern

Comcast Corp. and Time Warner Inc. released fourth-quarter financial results last week with both showing strong results, particularly in new services.

Comcast kicked off the cable-earnings season last Thursday showing strong basic-subscriber growth, as well as gains in new services.

Revenue for the quarter rose 10.6% to $5 billion and operating cash flow increasing 15.2% to $2 billion.

Comcast also added 60,000 basic subscribers in the seasonally strong period, as well as 250,000 digital customers and 437,000 high-speed Internet subscribers.

Comcast said it expects basic-subscriber growth for this year to be flat and projected that digital and high-speed subscriber growth would be comparable to 2004 when the MSO reported 1 million and 1.7 million additions, respectively.

2005: YEAR OF VoIP

Comcast president and COO Steve Burke reiterated on a conference call with analysts that 2005 will be the year of cable telephony for Comcast, adding that the MSO will roll out its IP telephone product in 17 markets, including Boston, Philadelphia, Chicago, Hartford, Portland and Seattle. Burke said that Comcast expects to sign on between 200,000 and 250,000 IP telephone customers this year, offset by the loss of about 100,000 circuit-switched telephone customers.

At Time Warner Inc., earnings rose 76% to $1.13 billion (24 cents per share) compared to $639 million (14 cents per share) in the prior year, on revenue of $11.1 billion (up 2%). Adjusted operating income before depreciation and amortization (OIBDA) rose 3% to $2.4 billion. Time Warner released its fourth quarter results last Friday.

Fueling that growth was strong performance at its cable operations: Revenue at Time Warner Cable increased 10%, to $2.2 billion, and adjusted OIBDA rose 11% to $887 million. Driving the gains at the cable division were increases in digital video subscribers (up 124,000 in the period) and high-speed data customers (up 197,000 in the quarter).

NEW-PRODUCT STRENGTH

While basic video customers declined by 14,000 in the fourth quarter, Time Warner Cable did show strong increases in new products. The MSO added 153,000 digital video recorder customers in the period, finishing the year with 862,000 DVR subscribers.

Subscription video-on-demand subscribers also increased by 171,000 in the period, to end the year at 1.5 million customers.

On the telephony front, Time Warner said it ended the year with 220,000 cable telephony customers.

At its cable and broadcast networks, revenue increased 6% to $2.3 billion and OIBDA rose 10% to $663 million.

FCF IN ’05

Time Warner issued guidance for 2005, predicting that adjusted OIBDA would grow in the high single digits and expects to convert 30% to 40% of adjusted OIBDA into free cash flow (cash flow after interest payments and capital expenditures are made).

March