VoIP Drives Comcast in 2Q

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Fueled by stronger-than-expected growth in its voice-over-Internet-protocol telephony product, Comcast reported another blowout quarter Thursday, growing second-quarter revenue by 11% to $6.2 billion and operating cash flow by 12% to $2.4 billion.

Leading the way was Comcast’s Digital Voice phone product, which added 306,000 subscribers during the period, besting most analysts’ estimates.

The nation’s largest cable operator also added 350,000 new digital-cable customers and 305,000 high-speed-Internet subscribers, outpacing most analysts’ estimates, as well.

Investors responded in kind, driving Comcast shares up 4.5% ($1.47 per share) to $34.03 each -- a new 52-week high -- in early trading Tuesday.

The better-than-expected results also drove Comcast to raise guidance for the year. On a conference call with analysts Thursday morning, the MSO said it expects revenue to rise 10%-11% this year (versus previous estimates of 9%-10% growth), operating cash flow to rise at least 12% (versus previous guidance of 9%-10%) and revenue-generating units (a combination of digital, voice and data customers) to rise 20% to 3.5 million for the year.

On the cable side, revenue should rise 10%-11% (previously 9%-10%) and operating cash flow should be at least 13% for the year (up from previous guidance of 10%-11%). Comcast added that it expects to add 1.3 million-1.4 million VoIP phone customers for the year, instead of the previously estimated 1 million.

On the conference call, chairman and CEO Brian Roberts said the quarter -- the company’s best second quarter in history -- was driven primarily by the phone product.

“The phone business is coming into its own and is driving an era of growth we haven’t seen for a long time,” he added.

Comcast has been adding about 23,000 phone subscribers per week (up from 10,000 weekly adds a year ago), chief operating officer Steve Burke said on the call, adding that achieving the new guidance shouldn’t be a problem.

Basic subscribers were down by 66,000 in the period -- typically a poor quarter for the industry as college students and vacationers disconnect service and move to summer residences.

On the conference call, Burke said Comcast typically loses 50,000-60,000 subscribers in Florida alone as snowbirds move north. He also added that roughly 40% of all of the college students in the country are within Comcast’s footprint, which also makes the company susceptible to seasonality.

Earlier on the call, Burke said Comcast’s joint purchase (with Time Warner Inc.) of Adelphia Communications is on track to close July 31. He added that Comcast expects that its portion of the Adelphia deal -- Comcast will gain about 1.7 million subscribers from Adelphia and through swaps with Time Warner -- should generate about $600 million in operating cash flow and add $300 million-$350 million to its capital-expenditure budget.

“These are great properties, and we see no reason why we can’t integrate them very smoothly into our system,” Burke said.

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