Comcast Bullish on Digital Telephony

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Comcast Corp. reported mixed third-quarter results, growing revenue and cash flow at a healthy clip but losing 46,000 basic subscribers in what is typically a strong period for customer additions.

Revenue grew 9.8% in the period to $5.58 billion and operating cash flow was up 13.9% to $2.1 billion in the period, fueled by additions in digital-cable (307,000) and high-speed-data customers (437,000). The Philadelphia-based MSO also added about 46,000 digital-phone customers in the period.

Analysts said the financial results were in line with estimates, but they expressed some disappointment in the basic-subscriber losses.

On a conference call with analysts, Comcast chief operating officer Steve Burke said about one-half of the subscriber losses were former lifeline customers who were paying Comcast an average of $15 per month.

“This loss of subscribers doesn’t concern us too much because during the quarter, we added over 700,000 high-speed-data and digital customers who, on average, pay us well over $40 per month,” Burke said. “When you net those two out, financially, it’s a very, very good trade.”

But investors apparently took the basic-subscriber losses more seriously, driving Comcast stock down nearly 5% ($1.31 per share) to $26.99 each in afternoon trading Thursday.

Comcast said it has digital-telephone service available in 21 markets, and it plans to be able to market the service to 15 million homes by the end of the year. The MSO also reiterated its target of 200,000-250,000 digital-phone customers by the end of the year.

Burke said that in markets where digital-phone service has been available for about one year -- particularly Indianapolis and Springfield, Ill. -- penetration rates are approaching 5%.

“It’s clear to us that demand will not be an issue any time in the near future,” Burke said of the digital-phone service.

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