Comcast Q4 profits triple


NEW YORK -- Comcast Corp., the largest U.S. cable operator, reported a fourth-quarter profit Thursday that almost tripled thanks to the acquisition of parts of Adelphia Communications and continued strong demand for advanced services.

Full-year 2006 revenue, operating cash flow and other key figures exceeded the company's guidance.

Chairman and CEO Brian Roberts called 2006 a "watershed" year, saying "it might have been our best year ever." He also reiterated his bullishness for the new year and beyond, predicting 30% more customer relationship gains for 2007 than 2006 and saying "growth and momentum are sustainable." He added that "we have lots of future room for growth."

Comcast shares, however, declined 3.1% on Thursday to $42.10 as some on Wall Street expressed concern about the company's higher-than-expected forecast for capital expenditures for 2007. But Roberts said Comcast wants to use its current advantage over satellite TV and telecommunications firms, thanks to the triple play service bundles that have buoyed the entire industry, and spend to aggressively sign up more customers.

Comcast's 2007 cable capital expenditure forecast of $5.7 billion is "higher than our $4.86 billion and that of consensus (expectations)," Bear Stearns analyst Spencer Wang said in a report.

Goldman Sachs analyst Anthony Noto called the spending projections "somewhat disappointing" but argued that all the expenditures are success-based. As a result, "higher (capital expenditures) should drive higher revenue than we thought," he said.

However, management said Thursday that they remained focused on driving shareholder value.

The company announced a 3-for-2 stock split in the form of a 50% stock dividend. This means that shareholders will receive a half-share for every share of Comcast they now own.

Also, Comcast continued to buy back stock in the latest quarter, bringing repurchases for 2006 to $2.3 billion. The company has another $3 billion to go under its buyback program.

Philadelphia-based Comcast reported a profit of $390 million for the fourth quarter, up from $133 million a year ago. Revenue rose 30% to $7.03 billion.

The company gained 110,000 basic cable subscribers, its highest number in more than a decade and nearly twice the average analyst estimate. It also added 613,000 digital cable subscribers, 488,000 high-speed Internet users and 508,000 digital phone customers, but it lost 87,000 users of an older telephony technology.

Overall, analysts said most of the user gains were in line with or ahead of expectations, with only telephony gains falling behind most forecasts.

Comcast customers spent an average of $95.38 in the latest quarter, up from $83.51 a year ago.

Overall, quarterly revenue at Comcast's core cable division increased 14% to $6.89 billion. Roberts said this was the strongest quarterly growth his team can remember.

Comcast's cable networks division, which includes such brands as E! Entertainment Television and Versus, boosted revenue in the fourth quarter 21% to $283 million as ratings and advertising revenue increased.

For 2007, Comcast forecast that cable revenue would rise at least 12% and the unit's operating cash flow would jump by at least 14%. The number of revenue-generating unit additions should reach about 6.5 million in the new year, up 30% from the about 5 million customer relationships added in 2006. Basic cable subscriber gains in 2007 will also outpace 2006 levels, management said.

Total revenue will increase 11%-plus in 2007, with operating cash flow to grow 13% or more, according to the company forecasts, but free cash flow will stay about even because of the spending on subscriber additions.

Asked about the company's day-and-date film release trials with six film studios via VOD in two markets, Comcast COO Steve Burke told analysts that they are going well, with buy rates "up very substantially." He said the company is looking to roll the service out further.

He also said that Comcast isn't worried about increasing demands from broadcasters, such as CBS Corp. and Sinclair Broadcast Group, that cable companies pay cash for the right to retransmit their signals. "We would assume that the current arrangements would continue until proved otherwise," Burke said. "We think we're in pretty good shape."

Management also said that Comcast expects to soon announce VOD availability of primetime programming from three of the four big broadcast networks. "We expect this VOD programming to offer advertising, somewhat new compared to traditional VOD programming," Oppenheimer & Co. analyst Thomas Eagan said.

Burke also said that the Adelphia integration is going well, with 10 of 15 planned integration waves done. Margins in the acquired systems are also starting to move up, he said, before adding that within two years of the deal's close the new systems should be up to Comcast's standards.