Comcast Q3 is solid
But the cable provider lost 147,000 subscribersNEW YORK -- The economic downturn is a double-edged sword for cable giant Comcast.
The largest cable provider in the U.S. reported solid third-quarter financials Wednesday that were roughly in line with expectations, but it lost 147,000 basic cable subscribers. The decrease was above a year-ago decline of 56,000 and more than most Wall Street expectations.
The housing crisis, competition from telecom firms and hurricanes contributed to the weaker basic subscriber figures, which do have a positive financial effect in the form of reduced capital expenditures on sub activations. As a result, Comcast said 2008 free cash flow should beat its projection of at least 20% growth from $2.3 billion in 2007. The company reaffirmed the rest of its 2008 guidance.
Comcast posted a third-quarter profit of $771 million, up 37.7% over the year-ago period. A $260 million reduction in cable capital spending helped boost the bottom line. Revenue rose 10% to $8.55 billion.
The company added digital cable, broadband and telephony customers but at a slower pace compared with the year-ago period. "Comcast's phone business is experiencing the most significant impact of lower gross adds," Collins Stewart analyst Thomas Eagan said.
Comcast chairman and CEO Brian Roberts said his team has adjusted the company's cost structure, product offerings and strategies in the past year in anticipation of the slowing economy.
In the face of tight credit markets, the firm said it won't use up all funds approved for a share-buyback program to keep its balance sheet as strong as possible.
"Is cable a good business? Is Comcast ready (for the downturn)? I think absolutely yes," Roberts said in a conference call.
Comcast COO Steve Burke also argued that the core business is "fundamentally resilient" even in a weak economy, and fewer sales of existing homes even help keep user churn low.
Economy service tiers, an increased user retention focus and expanded VOD and HD channel offerings will further help Comcast weather the downturn, he said.