Forecast: Steady Capex at Comcast

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Comcast Corp. is expected to spend the same amount of money on capital expenditures in 2006 — $3.4 billion — as it did in 2005, according to a new research study by Sanford C. Bernstein.

Capital spending is often viewed with a jaundiced eye on Wall Street: Comcast’s stock took a 5% hit on Nov. 3, partly because of capex concerns. But it’s the lifeblood of the technical vendor community, and Comcast is the biggest U.S. cable company, so its spending forecasts can be a key industry barometer.

Bernstein estimated Comcast would spend an incremental $40 million in the second half of 2006, associated with the acquisition of 1.8 million subscribers from Adelphia Communications Corp.

The firm estimates Comcast will spend $2.02 billion on customer-premises equipment, up about 10% from an earlier estimate of $1.85 billion.

Bernstein pegs scalable infrastructure spending for next year at $600 million: $293 million for line extensions, $218 million for upgrades and rebuilds and $316 million for support capital.

Craig Moffett, the senior analyst who wrote the report, gave Comcast high marks for a forward-thinking HDTV set-top strategy. “Comcast’s strategy of deploying [high-definition digital video recorder] combination boxes — instead of stand-alone DVRs — has put Comcast far ahead of competitors in HD-readiness,” he wrote. “By the end of 2005, Comcast will have pre-positioned HD in 24% of digital homes.

“This is nearly five times the HD readiness of their largest competitor, DirecTV, where only 5% of subscribers have HD boxes. In contrast to the consensus view, we believe this suggests that the risk to Comcast’s future capital spending is actually much lower than that of its competitors and peers.”

Moffett also downplayed fears Comcast might announce another rebuild or accelerate its all-digital plans, based on competition from Verizon Communications Inc.

Moffett said Comcast has plenty of non-rebuild options to increase bandwidth to match Verizon’s data and video offerings. Node-splitting and switched broadcast video are more efficient that rebuilding cable plant and would achieve the same end, he said.

Comcast had increased spending in 2005 from a forecasted $3 billion at the start of the year to $3.4 billion today. The increases were attributable to faster-than-expected uptakes of digital video recorders, which accounted for $250 million in spending, and faster than expected funding for voice-over-Internet protocol phone service, to the tune of $150 million.

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