Customer Growth Slows at Comcast

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It looks like the economic downturn officially came to cable in the fourth quarter, putting a dent in key customer growth metrics at No. 1 MSO Comcast, while having a lesser effect on the cable giant's revenue and operating cash flow growth.
Comcast shed 233,000 basic subscribers in the fourth quarter, well above analysts' estimates. Revenue and operating cash flow growth were about 8% for the period, in-line with expectations.
Comcast also said it would increase its quarterly cash dividend by 8% to 27 cents per share.
Coupled with the accelerated basic-customer losses -- analysts expected declines to be in the 200,000 range -- Comcast also saw a slowdown in advanced services growth in the quarter. Digital additions were 247,000 in the quarter, below analysts estimates of 400,000. High-speed Internet customers rose by 184,000, compared with  projections calling for 275,000 additions, while digital phone subscribers rose by 344,000, short of predictions of 425,000.
In a research report, Sanford Bernstein cable and satellite analyst Craig Moffett wrote that Comcast's results were a "carbon copy" of those of No. 2 cable operator Time Warner Cable, which released its fourth-quarter earnings on Feb. 4  -- "strong financially... but weak on all forward looking growth metrics."
Comcast stock was down 64 cents each (5%) in early trading Wednesday to $12.25 per share.
On a conference call with analysts, Comcast chief operating officer Steve Burke said that economy and stiffer telco competition led to the increased subscriber losses. He added that telco video overlaps about 22% of Comcast's footprint, versus 10% just a year ago.
Burke said that the economic impact has been primarily in lower housing starts and moves, not from people that are disconnecting service. Disconnects were actually lower than anticipated in the quarter, he added.
"We are not realizing a larger number of downgrades. We are not seeing a material increase in bad debt, which is really remarkable given what is going on around the world," Burke said. "We are not seeing large numbers of people dropping or television service either through financial hardship or the fact they can get video increasingly on the Internet."
Burke said that Comcast is making moves to reverse those subscriber trends, including increasing its direct sales efforts, introducing more aggressive promotions -- like $200 cash back to consumers who commit to a long-term contract -- and lower cost tiers, such as a 1 megabit-per-second high-speed data service for $24.99 per month.
Still, the company continues to look for ways to manage costs. On the conference call, chief financial officer Michael Angelakis said the company reduced headcount by 3,300 people in 2008, resulting in a $126 million charge to earnings for severance packages for the full year.

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