Comcast big on telephony, Web


NEW YORK -- Comcast Corp. management struck more bullish tones at the largest U.S. cable operator's analyst and investor meeting Tuesday in Philadelphia, predicting the company will grow annual cable revenue 12% and add at least 7 million customers through 2009 driven by demand for bundled video, high-speed Internet and telephony services.

Comcast also predicted that its online advertising revenue will reach at least $1 billion in the next five to six years as it expands its Web business and that Comcast Interactive Media, its unit that houses the portal, will turn in positive earnings before interest, taxes, depreciation and amortization by next year.

The cable giant also projected that operating cash flow will rise 14% annually through 2009 and that the penetration of its telephony product will reach 20%-25% by the end of 2009. In fact, Comcast will become the nation's fourth-largest phone provider this year, management said.

Importantly, executives said 2007 should be a high water mark of capital spending as a percentage of revenue, with free cash flow to grow after staying flat this year. Some investors this year expressed concern that Comcast would not boost its free cash flow this year and instead spend on signing up customers.

Management also reiterated its commitment to investing in growth initiatives and product differentiations, while returning capital to shareholders via stock buybacks and the like.

"The triple play is driving incredible operating momentum, and we see that accelerating as it continues to roll out," Comcast chairman and CEO Brian Roberts said. "The fundamentals of our business are extremely strong and we have never been more enthusiastic about the future of our company."

Presentations from the meeting, which were available via webcast, also featured Comcast COO Steve Burke and Comcast Programming president Jeff Shell, among others.

Roberts said advertising is a "tremendous" growth opportunity for the company, in terms of interactive ads on TV and on the Web via display, video and search ads on the cable operator's Web properties, like portal

On Monday, Comcast unveiled a partnership with Yahoo! Inc. to sell display and video ads on, reversing a decision to keep the site ad-free. Roberts said Tuesday that the deal is opening "a new area for us and (it is) a great start" as the company works to build video and commerce on the Web.

"Time will tell how much video customers want to consume online," he said.

Burke again lauded the early success in trials with day-and-date film releases, expressing hope for a broader rollout down the line. Such a move "would profoundly transform our pay-per-view business and would be substantial business for the studios," he said.

Importantly, research by a third-party firm showed that day-and-date releases are not cannibalizing the DVD market, Burke added.

Goldman Sachs analyst Anthony Noto said in a note Tuesday that Comcast's guidance exceeded some of his growth expectations. Given that the company traditionally has only released forecasts for one year and given its "historic conservatism in its guidance, we attach added emphasis to today's announcement," he said.

Noto also said he will review his financial estimates and $34 price target on Comcast shares, adding: "We believe Street numbers will also be revised higher."

Roberts on Tuesday received analyst questions on Comcast's need and desire to add wireless services to its product bundle. The CEO said his team doesn't see any real need right now. "We are actually maxed out and not in need," he told the investor and analyst meeting.

Roberts added that a joint venture, of which Comcast is part along with other cable operators and wireless provider Sprint, will over time look for "positive opportunities" and possible great new wireless features that would be attractive to consumers.

Comcast Class A special shares closed down 0.4% on Tuesday at $26.30. During the past year, they have traded between $19.79-$29.64.