The fact that Comcast has two chief financial officers should tell you something about how seriously the cable giant takes its finance department. And to hear either CFO tell it, that’s nothing new.
In fact, making sure that finance has a voice in the executive suite dates back to the early 1960s, when Ralph Roberts founded the company. At that time, Mr. Roberts, best known as an entrepreneur, joined forces with a financial wizard named Julian Brodsky, who would later become Comcast’s CFO and would instill a lot of the financial discipline that presently exists at the company. Today, the CFO title is shared by John Alchin and Lawrence Smith, both of whom are executive VPs and who divide the finance duties based on their respective areas of expertise. Mr. Alchin, the former banker, is responsible for raising capital and investor relations, while Mr. Smith, the former tax accountant, is in charge of Comcast’s tax, accounting and corporate development duties. Both report to Chairman and CEO Brian Roberts, son of founder Ralph Roberts.
Both executives say that the culture instilled during the Brodsky years is still very much in place and was instrumental in helping Comcast overcome hurdles that might have caused other companies to stumble. Among them were Comcast’s massive acquisition of AT&T Broadband and the simplification of the company’s capital structure that took place at the same time the company was digesting the AT&T assets. There’s also the one thing that has all public companies in the United States scrambling to one extent or another: adherence to a slew of regulations, including the Sarbanes-Oxley Act of 2002, that are designed to strengthen corporate governance rules and hold executives more accountable.
“I would say that the Comcast culture has always been that the CFO role is a very strong business partner,” said Mr. Smith. “We are a very entrepreneurial, financially disciplined company. New opportunities need to make business and financial sense for us to pursue them.”
That financial discipline came in handy when Sarbanes-Oxley went into effect, Mr. Alchin added.
“Prior to Sarbanes-Oxley, we already had a lot of checks and balances,” he said. “We had a strong internal audit group, populated by the best of breed and a discipline that Julian Brodsky instilled from the outset. With the advent of Sarbanes-Oxley, they became more formalized, but they were all in place.”
It is perhaps the AT&T Broadband acquisition that has proven the best illustration of the company’s financial skill. It was an achievement for the company to integrate and upgrade the AT&T systems a year ahead of schedule, but Comcast accomplished a few more feats while this integration was under way, including paring down its debt load and simplifying its capital structure.
Mr. Alchin said the AT&T deal almost overnight transformed Comcast from a relatively small, entrepreneurial company with multiple bank financings into a multiple system operator serving 22 million subscribers. Rather than maintain the status quo, Mr. Alchin and his team opted to streamline the company’s capital structure into a single credit line valued at around $4.5 billion. That, combined with a series of asset sales, including its stake in home shopping channel QVC, has simplified a capital structure that once had a lot of moving parts.
In addition, the company continues to attack its debt, which is now at around $22 billion, from $27 billion earlier this year.
Both Mr. Alchin and Mr. Smith noted that the importance of the finance department is something woven into the entire Philadelphia-based company. Comcast has far-flung operations and a footprint that covers 22 of the nation’s top 25 markets. But that hasn’t prevented the company from applying a similar commitment to financial discipline to even its smallest operations.
“We run the cable business on a regional basis, and over 10 years ago, as the size of our acquisitions got larger, we made a decision to put a strong financial person in each region,” Mr. Smith said. “That means everyone is thinking about [financial] controls.”
That philosophy will come in handy as Comcast opens up new avenues of growth. While its bread and butter is cable television, Comcast is also the nation’s largest provider of high-speed Internet service and is gearing up to introduce Voice over Internet Protocol-based telephony next year.
Comcast is also betting big on video-on-demand and recently struck a deal to buy a stake in the partnership that is merging Sony Pictures Entertainment with Metro-Goldwyn-Mayer. The transaction will give Comcast access to more than 400 movies a month that will be made available on Comcast’s VOD service.
Mr. Smith said that Comcast is also examining opportunities in gaming and wireless and how its high-speed data business might interact with both.
“As you look at the revenue and cash flow growth, the vast majority of it is driven by these new products,” Mr. Alchin said. “We have made huge investments over the last few years, changing the architecture of our network, and now we have a state-of-the-art, two-way network. That allows us to deploy a lot more video channels, high-definition television, two-way services.”