Comcast Raises New-Service Forecasts

11/12/2000 7:00 PM Eastern

Comcast Corp. has raised its year-end digital-cable and high-speed-data customer projections based on strong third-quarter growth in those segments.

The company's cable unit finished the quarter with 1.1 million digital subscribers, an increase of 190,000 over the previous quarter. As a result, Comcast raised its fourth-quarter digital subscriber target to 1.35 million customers, up from 1.25 million.

Comcast added 66,000 high-speed-data subscribers in the period, finishing the quarter with more than 303,000. The company increased its year-end estimate to 375,000 high-speed data subscribers from 350,000.

The MSO added about 250,000 new revenue-generating units-a closely watched measurement of digital and high-speed data customers-over the period, finishing with 1.4 million RGUs. The company said it has added 915,000 new RGUs in the past 12 months and should finish the year with 1.725 million.

Overall, pro forma revenue rose 8.6 percent and operating cash flow rose 11.9 percent for the quarter. In the cable division, revenue increased 7.9 percent, to $1.1 billion, and cash flow rose 10.1 percent, to $496.5 million.

At home-shopping network QVC, revenue rose 9.2 percent, to $820.3 million, and operating cash flow increased 11.6 percent, to $139.3 million.

E! Entertainment Television reported revenue and operating cash-flow growth of 20.1 percent and 34.7 percent, respectively.

Basic-subscriber growth in the period was 1.1 percent. Comcast has 7.5 million subscribers.

Comcast said it expects the pace of revenue and cash-flow growth to continue in the fourth quarter, especially since its new digital package, called "Digital Plus," will have been available for the full three months.

Digital Plus, a $14.95 package that includes premium-movie and digital-basic channels, launched in August. The initial results have been encouraging, prompting Comcast to expect big things from the service in the future.

According to cable unit president Stephen Burke, the higher-end digital service is most popular with new customers, and Comcast is set to take on some new systems as a result of swaps next year.

"We are seeing the majority of new customers taking that $14.95 product," Burke told analysts on a conference call last Monday. "We expect one-third [of the customer base] by the end of the year to have Digital Plus. Over time, it could get to as much as 75 percent. We see the $14.95 product as being the future."

Comcast also has big video-on-demand plans, said Burke, and expects to begin testing a VOD product early next year.

"It's a good chance that our No. 1 focus in 2001 will be VOD," Burke said. "By the second half of 2001, you will see us rolling it out very aggressively."

But one new-service category that appears to have moved down the pecking order is telephony. During the conference call, Comcast president Brian Roberts said plans to eventually offer a telephony product have not changed in light of AT&T Corp.'s restructuring plans. Telephony is not currently a top priority, he said.

Earlier this month, AT&T announced it would split into four different business units over the next two years.

"We believe nothing truly has changed," Roberts said. "We are pleased we made the decision to bet on [Internet protocol]. We have said all along we would love to do something with AT&T.

"If the circumstances don't allow that, it won't get in the way of the [telephony] gold mining opportunity," he added.

Roberts added that Comcast may get more serious on telephony after its VOD rollout "if the price-point drops."

"We like to do one priority at a time," he said. "The biggest sure way to get revenue growth is someday getting into the phone business."

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