In its recently completed third quarter, Comcast had healthy increases in VoIP subscribers and broadband subscribers, and it migrated more customers to the digital tier, all helping to lead to higher ARPU per basic subscriber and total revenue. But the company gained a modest number of basic subscribers, spent more on capital investments, took a charge associated with its integration of parts of Adelphia, and reported a profit of less than half what it was a year ago.
Comcast’s drop in profit and its warning that competition will take its toll on its upcoming Q4 financials seems to have triggered a sell-off. It’s always hard to tell what will spook investors – the entire market took a hit on some bad economic indicators, but the stocks of every major U.S. cable company were down after Comcast’s news (the major Canadian operators were up). The market had shaved nearly 10 percent off Comcast’s stock value as of mid-day. Charter got it worse.
In the quarter just completed, Comcast earned $560 million, down from $1.2 billion a year ago. Revenue was up from $6.4 billion in Q3 2006 to $7.7 billion in Q3 2007. Comcast reported a drop of 65,000 in basic subscriber additions, but still had 24.1 million basic subscribers, essentially flat from a year ago. Digital subscribers jumped from 12.1 million a year ago to 14.6 million in Q3 ’07, however. Digital penetration is now just below 61 percent. Last year, Comcast had 18.5 million digital set-tops installed with subscribers; as of Q3 ’07, the company had 24.7 million in the field.
Comcast said 8 million, or 40 percent, of its digital cable subscribers take advanced services such as digital video recorders (DVR) and high-definition television (HDTV) compared to 4 million, or 33 percent, one year ago.
Average video revenue per subscriber is up almost $3 per, to $60.72, while average total revenue is up just over $10 per, to $102.24.
The company had 450,000 broadband subscriber adds, down from 538,000 a year ago, but a sequential increase from the 332,000 signed up in Q2 ’07.
Comcast also signed up 662,000 VoIP customers, almost matching its success from a year ago, when it attracted 673,000 new VoIP subs. In the past year, the company went from 1.3 million VoIP subs to 3.7 million. Meanwhile, the company is rapidly shedding its circuit-switched customers, and it intends to keep doing so. It was not clear from the company report how many circuit-switched customers are migrating to Comcast VoIP.
Looking ahead, Comcast said it expects a softening economy, and it expects increasing competition will have an effect on its upcoming Q4 results.
Capital expenditures increased 19 percent to $1.5 billion, compared to $1.3 billion a year ago.
Year-to-date cable capital expenditures increased 39 percent to $4.5 billion from $3.3 billion in the same period a year ago. Comcast said that reflects a 40 percent, or 1.4 million, increase in RGU additions and a 20 percent increase in the number of digital customers added with advanced digital services (HD and/or DVR service). Some of that also reflects investing in the upgrade of former Adelphia systems.
Comcast also authorized another $7 billion for stock buybacks.