Comcast Reports Mixed Q4


While investors may have been concentrating more on its plans to issue a dividend, Comcast reported mixed fourth-quarter results Thursday. The cable operator exceeded some analysts’ expectations for revenue and cash flow growth, but revealed that it lost 94,000 basic video customers in the period.

Comcast reported pro forma revenue growth of 10% to $8 billion and operating cash flow growth of 14% to $3.1 billion in the quarter, slightly ahead of some analysts’ predictions of $7.9 billion in revenue and $3 billion in operating cash flow.

But the 94,000 basic-customer defections -- the cable giant lost 180,000 customers for the full year -- outpaced analysts’ consensus estimates of about 80,000 subscriber losses.

On a conference call with analysts, Comcast chief operating officer Steve Burke said that the cable company was addressing customer losses head-on -- it is “significantly” increasing its marketing spend in 2008, continuing its rollout of a lower tiered high-speed data service for $24.95 per month and deploying switched digital service to 20% of its footprint by the end of the year. In addition, Comcast is intensifying its efforts for commercial services -- commercial phone and data generated about $384 million in revenue in 2007 -- and intends to capture about $2.5 billion worth of commercial business by 2011.

On the call, Burke said the basic-subscriber trend will likely continue in the coming years, adding that economic pressures and mounting competition from phone companies an satellite TV contributed to the losses.

Burke said that the sluggish economy has hurt Comcast in that many customers rolling off the cable operator’s promotional triple play packages are unable to pay the increased rate, which works out to about an additional $20 per month. That, he said, can be addressed in offering them a lower-tier data service to maintain the $99 per month price point.

“What we have found is that as the economy has softened it’s harder to get the $20 than it was,” Burke said. “One of the reasons why we’ve introduced these economy tiers is there are some people who get to the end of the 12 months and say I can only or I only want to pay $99. And now with a slower speed data product we can say you can stay at $99, but you’ll have a slower data product. We’re still shooting for the $20, the majority of customers do stay with us and we are able to upgrade them.”

Burke said that because of competitive pressures and the economy, the basic losses are likely to continue. But he added that Comcast’s focus on attracting higher-end customers will make up the difference.

“As the largest incumbent video provider, we will inevitably lose basic video customers to new entrants and our 2008 plan includes an increase in basic subscriber losses,” Burke said. “The good news is with all of our new businesses we will gain much more than we lose as high-speed Internet, digital voice, digital video and commercial services power our business in the future.”

Burke added that products like high-definition TV and digital video recorders add an incremental $10 in revenue per month, per customer but don’t show up as additional subscribers.

Comcast said that it had 6.5 million customers that took either HD or DVR services in 2007, up from 4.5 million in 2006. Burke added that Comcast will significantly increase its HD channel offerings -- from 25 and 30 currently -- to between 50 and 60 channels by year-end. Its HD On Demand offerings, now at about 300 today, will rise to 1,000 by the close of 2008..

“We’re more than holding our own,” Burke said.