Comcast Reports Strong Q4 Growth


Comcast reported strong fourth-quarter
financial results and a surprising basic-subscriber resiliency,
while perennial customer-growth powerhouse Cablevision
Systems showed some uncharacteristic weakness.

Comcast beat analysts’
estimates on
practically every
front in the fourth
quarter — basic-video
losses, at 135,000,
were far below consensus
estimates of
206,000 losses and
revenue and cashflow
growth at 7.2%
and 9%, respectively,
solidly beat expectations.
As a result, the
MSO hiked its annual
dividend payout
by 19% to 45 cents
per share and boosted
its share repurchase
to $2.1 billion by the
end of 2011.

“We have strong financial and operational momentum,”
Comcast chairman and CEO Brian Roberts said on a conference
call with analysts Wednesday. “We’re starting to execute
the many unique opportunities that are available to
Comcast, now that NBC Universal is now a part of our company.”

At Cablevision, which has maintained steady subscriber
metrics over the past several years while its peers have
shown consistent declines, the tables were turned. The
Bethpage, N.Y.-based MSO lost about 35,000 basic-video
customers in the period — three times analysts’ consensus
estimates — almost all of which it attributed to its October
2010 retransmission-consent fight with Fox Broadcasting.
Cablevision customers lost access to Fox programming for
two weeks in October, including several National Football
League contests and the first two games of Major League
Baseball’s World Series.

While the stations have since been returned to Cablevision
customers, the one-time hit caused some analysts to
wonder if the Cablevision growth juggernaut was starting
to slow.

Cablevision has been the top performer in the industry for
years — it leads in digital, high-speed-data and phone-service
penetration by a wide margin and, since 2007, has lost
only 115,000 basic-video customers (3% of its base). In contrast,
Comcast has lost almost 2 million basic customers (8%
of its base) in the same time frame.

On a conference call with analysts last week, Cablevision
chief operating officer Tom Rutledge said the Fox battle,
while unfortunate, resulted in the MSO getting a significantly lower programming price than if it had accepted the
first offer.

“It was a decision we had to make,” Rutledge said of the
Fox battle. “We thought that taking the hit was worth it.”

Rutledge added that he believed the losses were an anomaly
and that most of the losses were video-only subscribers.

But investors appeared
— at one point on
Feb. 16, Cablevision
stock fell more than
6% ($2.38 each to
$35.04) before settling
down to close
at $36.76 per share,
down about 2%.

In a research note,
Sanford Bernstein cable
and satellite analyst
Craig Moffett
wrote that the subscriber
losses were
about three times the
11,000 most analysts
expected and, coupled
with weak highspeed
data additions
(6,000) and voice additions
(9,000), could signal that Cablevision has hit a customer-
growth wall.

“Unfortunately, virtually all the forward-looking subscriber
metrics were weak,” Moffett wrote, adding that
the subscriber losses were the worst since Verizon Communications
launched its competing FiOS video product
in 2007.

The Fox fight also appeared to affect financial metrics
— revenue was up 6%, to $1.9 billion in the period, but adjusted
operating cash flow rose just 2.3% to $631.7 million.
On the call, Rutledge said increased marketing costs during
the Fox battle impacted AOCF somewhat.

Rutledge also pointed to growth opportunities with new
services : Cablevision is rolling out its network DVR product
in New York City and has plans to launch its PC-to-TV Media
Relay service this quarter and, with its December acquisition
of Bresnan Communications (with 306,000 customers
in Colorado, Montana, Utah and Wyoming), growth opportunities

“It was an attractive property from a financial perspective,
but operationally it’s very attractive,” Rutledge said. “There
is an opportunity to create value.”

Executive vice president Gregg Seibert said Cablevision is
looking for other acquisition targets, but so far hasn’t seen
anything to its liking.

Siebert called the Bresnan acquisition sort of a perfect
storm of attractive financing, attractive properties and attractive
tax attributes.

“The properties we see from time to time in the marketplace
really haven’t come up to that level,” Seibert said.
“We continue to look. Hopefully we’ll see something that
matches that quality at some point in the future.”