Comcast Q3 Earnings Up Despite Slowdown

Oct 29, 2008  •  Post A Comment

Comcast CEO Brian Roberts on Wednesday declared that the nation’s largest cable operator is ready for the economic downturn.
In the face of a worsening economy, Mr. Roberts, speaking on the company’s third-quarter earnings conference call with analysts, asked, “Is cable a good business? Is Comcast ready? I think absolutely yes.”
Despite a the slowdown and a drop in basic subscribers, Comcast Corp. said its third-quarter earnings rose 38%.
Net income was $771 million, or 26 cents a share, up from $560 million, or 18 cents a share a year ago, exceeding Wall Street’s expectations.
Mr. Roberts said Comcast saw signs of change a year ago, and began taking steps then.
“We saw our world beginning to change. A softer economy with slower growth rates and also more competion,” he said, noting that being prepared was something he was taught by his father, Comcast founder Ralph Roberts, who’s life was affected by the Great Depression.
“He trained me always to be ready for even the most unexpected future and I think that’s a big reason why Comcast in in such a strong position today,” Mr. Roberts said.
Comcast does not need to access the capital markets anytime in the foreseeable future, he said, and can fund its obligations from internal cash flow, which he said was an enviable position these days.
With analysts looking for signs about how the economy will affect the television business, Mr. Roberts said that at this point, it appears its subscribers still want to watch TV and stay connected via the Internet. It saw little change in disconnections, but said consumers appeared more reluctant to upgrade service.
Comcast said its basic video subscribers declined by 147,000 to 24.4 million during the quarter. The company said that 15,000 of those subscriber losses were caused by this season’s hurricanes. A year ago in the third quarter, the company lost 56,000 basic subscribers.
The growth of digital cable subscribers slowed to 417,000 in the quarter, compared to 503,000 a year ago. High-speed Internet customer growth was also down, but revenue was up 9% to $1.8 billion.
Phone revenue rose 44% to $690 million in the quarter.
Comcast COO Steve Burke said Comcast was seeing more competition from AT&T than from Verizon recently. But he added that Comcast added more high-speed data customers than AT&T and Verizon combined.
Despite the economy, the company reaffirmed its guidance to investors that consolidated revenue and operating cash flow would grow 8% to 10% for the year, and that free cash flow would grow by at least 20%.
Revenues for Comcast’s programming segment were up 5% to $347 million, and operating cash flow was up 9% to $105 million. The company said the gains in the segment—comprised of E! Entertainment Television, Style Network, Golf Channel, Versus and G4—were due to higher distribution revenue and strong international revenue growth.
The company said softness in ratings because of the Olympics impacted ad revenues for its cable networks.
Comcast said advertising revenue at its cable systems was down 10% to $374 million in the third quarter.
In a research report. Sanford Bernstein analyst Craig Moffett said that cable is as close as you can get to being a recession-proof industry.
“But even at Comcast, signs of economic weakness are there, even if relatively faintly,” he said.
Mr. Moffett said that cable stocks are the best defense for investors in the telecom, cable and satellite sector.
“It’s good to be a subscription-based business when times get tough. And it’s even better to be the only high capacity pipe into the home (in an overwhelming majority of markets) at a time when people are using more and more bandwidth, and are spending more and more time at home,” he said


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