Data, Phone Drive Comcast Q1

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Comcast lost about 82,000 basic subscribers in the first quarter, but fueled by strong increases in high-speed data and phone customers managed to squeeze out better than expected results.
Consolidated revenue was up 3.8% to $9.2 billion and operating cash flow rose 3.5% to $3.6 billion, in line with most analysts' estimates. In the cable segment, revenue rose 3.5% to $8.7 billion and operating cash flow was up 4.1% to $3.5 billion Fueling that growth was 399,000 additional high-speed data customers (its best performance since the first quarter of 2008) and 273,000 additional digital phone customers. Advertising revenue increased 24% in the period and commercial services also contributed to the growth, with revenue in that segment up 49%. Capital expenditures also decreased 20.3% in the period to $925 million, which helped boost free cash flow to $1.9 billion, a 38.1% increase over the same period last year.
In a research note, Sanford Bernstein cable and satellite analyst Craig Moffett estimated Comcast generated about $5.10 in advertising revenue per customer per month in the period. While the advertising segment is still small compared to the company's overall revenue, it is a high margin business, Moffett said.
"Turning advertising from a headwind into a tailwind is a potential powerful contributor to positive revisions for 2010," Moffett wrote.
On a conference call with analysts, chief operating officer Steve Burke said the high-speed Internet growth was due to the near completion of Comcast's DOCSIS 3.0 rollout (it is available in 80% of the footprint and should be finished by the end of the year).
"We have real product superiority over DSL in most of the country and believe this is translating into significant share gains," Burke said on the call. He added that the company's wireless high-speed Internet product -- High-Speed2Go -- has already launched in five markets (Chicago, Portland, Seattle, Philadelphia and Atlanta) and will launch in two additional markets (Boston and Houston) in the second quarter.
Burke added that business services growth was strong in the quarter as well - revenue was up 49% -- and the company is expanding that service to include medium-sized businesses. Burke did not estimate the potential size of the market in Comcast's territory, but said it was a "very substantial opportunity." He added the company has begun hiring a sales force to sell to medium-sized businesses.
"We are in the early stages of an exciting opportunity in medium-sized businesses just as we were several years ago in the small end of the business market." Burke said.
Comcast's programming segment, which includes cable channels E! Entertainment, Style, the Golf Channel and Versus, continued to shine, with revenue up 6.7% to $385 million and operating cash flow up 8.5% to $121 million. The company continues to wind through the approval process for its NBC Universal joint venture with General Electric. On the conference call, chairman and CEO Brian Roberts said the process was moving forward and would hopefully be concluded this year.
In a research note, Citigroup media analyst Jason Bazinet wrote that while revenue and cash flow growth were in line with expectations, he was impressed by the company's free cash flow, advertising and revenue generating unit performance. Comcast added about 590,000 non-digital RGUs in the quarter. The analysts' consensus estimate for the quarter was 391,000 RGUs.

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