A $1.5 billion breakup fee -- the result of Comcast
Corp.'s agreement with AT&T Corp. to drop out of the bidding for MediaOne Group
Inc. -- pushed the Philadelphia-based MSO well into the black for the second quarter ended
Comcast reversed losses of 22 cents per share in the same
period in 1998 to a $1.10-per-share profit. Without the breakup fee, it would have had
losses of 8 cents and 17 cents per share for the quarterly and six-month periods,
While the MediaOne money pushed it over the top, Comcast
turned in another stellar quarter in its own right, boosting revenue by 22 percent and
operating cash flow by 29.6 percent. Driving those increases were substantial gains in
digital-cable and high-speed Internet subscribers.
Revenue for the second quarter was $1.5 billion compared
with $1.3 billion the previous year, and operating cash flow was $457.3 million versus
$394.2 million a year earlier. In the six-month period, Comcast reported cash flow of
$926.1 million on revenue of $2.9 billion.
This was the first quarter for which Comcast included
revenue and earnings from Jones Intercable Inc., the Englewood, Colo.-based MSO that it
purchased earlier this year.
However, Jones did not have as good of a first half as its
new parent. While the company reported a 31 percent increase in revenue during the
quarter, to $132.7 million, its operating cash flow was down 18 percent to $36.1 million.
Comcast said Jones' financials were impacted by
several factors including restructuring charges resulting from its merger with Comcast;
the sale of certain cable systems by its managed partnerships; one-time adjustments
related to court cases regarding late fees; sales- and use-tax audits and other
adjustments; and the disposition of certain noncable assets.
However, Comcast added, the merger with Jones is going
smoothly, and the company will launch high-speed-data services in three, and possibly six,
new markets within Jones territories in the third quarter.
Jones is also expected to boost its total digital-cable
subscribers as its networks become capable of offering the service. Although Comcast
finished the quarter with 225,000 digital-cable customers -- an increase of 92,000 -- the
bulk of those new subscribers were in Comcast systems.
Comcast senior vice president and treasurer John Alchin
said in a conference call with analysts that of the increases in digital subscribers
during the period, only 3,800 came from Jones systems.
However, he added, Jones -- which currently has digital
offerings in just two markets -- will increase that capability to five or six markets in
the third quarter.
"By year-end, we expect about 75 percent of the Jones
systems to be offering the digital product," Alchin said. "Jones should be
adding as many as 1,000 [digital] customers per week by the time we get to the end of the
Comcast nearly doubled the number of systems in which the
digital product is available, reaching 3.5 million homes, and it increased its weekly
install rate from 5,000 to almost 8,000 in the second quarter. As a result, the MSO is
revising its year-end estimates for the digital service to between 400,000 and 450,000
Comcast@Home, the company's high-speed Internet
service, ended the quarter with 94,000 customers, up by 21,000. Comcast also increased its
high-speed-data footprint by 72 percent in the quarter, to 2.4 million homes passed from
1.4 million a year ago.
QVC Inc., the company's home shopping unit, posted
revenue of $630 million, up 16.5 percent. Cash flow was up 31 percent in the quarter,
marking the division's ninth consecutive quarter of double-digit cash-flow growth.
"Obviously, we had a lot going on this quarter,"
Comcast president Brian Roberts said during the conference call. "QVC's results
are just amazing, and I think they merit an incredible acknowledgement of how well that
business is firing. A lot of it is just pure execution. Consumers are more comfortable
making purchases now without touching the product, thanks to the Internet."
Speaking of the Internet, Comcast's investments in
worldwide cable networks, through its Comcast Interactive Capital Group unit, had a huge
Roberts said Comcast has about $100 million of its own
money in the interactive unit. But that investment nearly quadrupled because of a single
company: Internet Capital Corp.
Comcast's position in ICC -- which went public Aug. 5
-- is now worth about $375 million. Roberts said the other investments in the unit are
worth another $100 million.
"We're having great success in building value for
the shareholders," he added.