In its first financial report since it acquired AT&T's cable business, the Comcast Corp said Thursday that it posted strong growth in fourth-quarter revenue and cash flow. It also announced a solid 2003 forecast based on good subscriber numbers and lower-than-expected capital spending.
The report indicates that the integration of Comcast and AT&T Broadband, which Comcast bought for US$47 billion last year, is going well and that Comcast's management is improving the former AT&T systems. It also reassured investors about cable's health in its battle for subscribers with satellite television providers.
"Comcast is the leader, and how it does affects the health of the industry," said Jessica Reif Cohen, an analyst who follows the cable industry for Merrill Lynch. In her view, satellite television is the biggest threat to the cable industry, and Comcast's report reassured investors that a company with strong management could successfully compete. Comcast is led by Brian L. Roberts, the chief executive, who is the son of Ralph J. Roberts, a company founder.
Shares of Comcast rose US$1.87 on Thursday, to US$28.37.
For the fourth quarter, Comcast posted a net loss of US$51 million, or US$0.03 a share, compared with a loss of US$321 million, or US$0.34 a share, in the period a year ago. Sales rose 55 percent, to US$4.37 billion from US$2.82 billion, in large part because of the acquisition. When it was adjusted as if the merger had taken place in the fourth quarter of 2001, revenue rose 11 percent.
The cable industry tends to focus on cash flow as a measure of financial health, and cash flow in the quarter -- earnings before interest, taxes, depreciation and amortization -- rose 15.1 percent, to US$1.34 billion. For 2003, Comcast said it expected cash flow from cable operations to jump 27 percent, to about US$6.2 billion. It had previously forecast growth of 20 percent. Comcast attributed the improved projection in large part to savings related to the merger. Only US$300 million is expected to come from growth in cable systems.
Positive vibrations
Investors reacted positively to the projections for 2003 cash flow and the company's subscriber numbers. Comcast has been stemming the losses that had plagued AT&T Broadband, and the number of subscribers is likely to be flat for 2003, at about 21.3 million, instead of continuing to decline, the company said.
For the fourth quarter, Reif Cohen said, she had expected Comcast's systems to add 1,000 subscribers; instead, they added 40,600. Meanwhile, AT&T Broadband lost 49,700 subscribers, instead of the 77,000 Reif Cohen had expected. The overall subscriber loss was 9,100, which was also smaller than Reif Cohen had expected.
Investors also noted that for the first three months of the merger -- November, December and January -- Comcast had lost only 7,900 subscribers, compared with a loss of 170,000 subscribers in the period a year earlier. Those figures were perhaps the clearest sign that Comcast had stanched the losses at AT&T Broadband, which had shed about 125,000 subscribers in each of the previous three quarters.
As the industry nears the saturation point, much of the revenue growth will come from new services. For last year, Comcast added 1.5 million digital cable subscribers, for a total of 6.6 million. The number of high-speed Internet subscribers jumped by 1.2 million last year, to 3.6 million.
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