Comcast Profit Rises 28%, but Shares Fall on Subscriber Loss
Leading U.S. cable operator Comcast posted a 28 percent rise in quarterly profit Thursday, but it lost more basic video subscribers than analysts expected, sending shares down 3 percent.
Although Comcast's profit and revenue growth was in line with expectations, the company lost 95,000 basic video subscribers in the second quarter -- a much bigger loss than the 20,000 forecast by Bear Stearns analyst Spencer Wang or the 12,000 estimated by Sanford Bernstein analyst Craig Moffett.
Comcast usually loses some customers in the second quarter as university students terminate their contracts at the end of the school year, but analysts had expected that to be offset this quarter by subscriber gains elsewhere. Comcast had lost 91,000 basic video subscribers in the year-ago period.
Analysts said it was not immediately obvious if the shortfall reflected stiffer competition, such as from satellite television companies, or if it was the impact of integrating older cable systems acquired in the last year from the likes of Adelphia.
"Whether that was because of satellite or the migration over from Adelphia to Comcast is not clear," said Thomas Eagan, an analyst at Oppenheimer. "The company's only recently decided to focus on basic subs. It's been more focused on digital TV and digital phone."
However, Eagan added that Comcast's results were "largely positive."
The company said net profit rose to $588 million, or 19 cents per share, in the second quarter, up from $460 million, or 15 cents per share, a year earlier.
Revenue rose 31 percent to $7.712 billion, driven by a rapid uptake of digital television and phone subscribers.
Comcast reaffirmed its 2007 outlook and Chief Executive Brian Roberts said in a statement, "We see cable growth accelerating in the second half of 2007."
The company, which has over 24 million subscribers, is leading the charge by U.S. cable operators to win subscribers from telephone companies by aggressively marketing its bundled television, high-speed Internet and phone services.
Comcast added 823,OOO digital video subscribers in the second quarter as it aggressively introduced digital TV set-top boxes to beat a U.S. regulator deadline of July 1, after which it has had to introduce a new stock of CableCARD-enabled set-top boxes.
The CableCARD was mandated by the U.S. Federal Communications Commission to make it easier for consumers to more easily change cable providers. The drive by Comcast saw a 52 percent rise in capital expenditure during the quarter.
Comcast's high-speed Internet subscribers grew by 330,000, compared to 333,000 additions last year.
Bear Stearns' Wang had forecast net additions of 729,000 digital video subscribers and 390,000 Internet subscribers.
The Philadelphia-based cable company also added 554,000 phone subscribers, versus Wang's forecast of 516,000.
Comcast shares fell 3.2 percent to $27.63 in premarket trade, from their Wednesday close of $28.54 on the Nasdaq.