Citing strong growth in digital cable service and cable modem connectivity, Comcast reported quarterly cable revenue of $4.374 billion, representing an 8.4% increase over the $4.035 billion for the same period last year. On the one year anniversary of its merger with AT&T Broadband, the company said it has reversed the loss of cable subscribers to DBS, even in the former AT&T systems, made significant progress in its rebuilding program, and raised company-wide margins to 37%. Some highlights of the quarter:
- Cable Modems: Comcast added more than 472,000 new cable modem customers, representing an over 39% increase from last year’s Q3. The Q3 growth rate accelerated over Q2. The company now has 4.9 million cable modem customers and is increasing its guidance for new accounts in 2003 from 1.6 million to 1.7 million net additions and expects to end the year with approximately 5.3 million customers, representing a penetration rate of 14.5%. More than 84% of the homes in Comcast’s footprint, or over 33 million homes, now have access to high-speed Internet service. This represents the addition of over 1.3 million homes to the service’s footprint during Q3. Subscriber growth during Q4 is expected to be driven by continuing increases in penetration, expansion of the service’s footprint to 34 million homes, and expanded retail distribution to more than 4,000 retail outlets. ARPU was $42 and in line with the company’s expectation. Comcast expects ARPU will hold at current levels.
- Telephony: quarterly telephony revenue declined by 11.5% to $189 million. There was a loss of 55,000 telephony subscribers in the quarter and as a result Comcast now expects to lose a total of 175,000 telephony customers for the full year 2003. Comcast said it continues to focus on the profitability of its telephony service. Margins are currently at 15% and the company is targeting 25% margins in 2004. Long term, the company is focusing on VoIP and is currently putting together a senior management team to lead a major push into this arena.
- Digital Cable: Comcast added over 318,000 Digital Cable subscribers to end the third quarter with 7.273 million Digital Cable subscribers, a pro forma increase of 16.6% over the same prior year period, representing a subscriber penetration rate of 34.0%.
- VOD: is now available to 31% of subscribers including in Philadelphia, Boston, Baltimore and Los Angeles. VOD availability is expected to increase to over 50% of our subscribers by the end of this year. Comcast said it is very bullish on the future of VOD. Last week, the company received over one million VOD orders for pay-content and free-content in its Philadelphia market alone.
- HDTV: Comcast’s deployment is ahead of schedule, having already reached the year-end goal to have HDTV available to 65% of our subscribers. Comcast now plans to have HDTV available to nearly 75% of subscribers by the end of this year. Over 24% of new HDTV customers are new to Comcast.
- DVRs: Comcast plans to roll out Digital Video Recorder (DVR) service beginning in the fourth quarter of 2003 and to have DVRs available to all of the Company’s subscribers by the end of 2004. The DVR service will be priced at $9.95 per month.
- CAPEX: Spending totaled $1.045 billion as Comcast Cable completed the rebuild of over 14,800 miles of plant to end the quarter with nearly 92% of its footprint upgraded to provide two-way digital and high-speed Internet services. The systems acquired from AT&T Broadband are now 89% upgraded to deliver two-way digital cable and high-speed Internet service, up from 85% at June 30, 2003. By the end of the year, Comcast will have 95% of its network upgraded, 15% ahead of its original goal. This accelerated rebuild will be accomplished while maintaining the company’s original capital expenditure guidance of $4 billion. Comcast expects to complete its network upgrade in 2004.
- Cash Flow and Net Debt: the company has paid down $5.3 billion in debt so far this year. Cash flow from the cable business exceeded $1.6 billion in Q3, a 35% increase over the prior year and operating cash flow margin continues to improve from 30% last year to 37% this quarter.
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- In October 2003, Comcast, the largest MSO in the U.S., doubled the downstream speed of its residential cable modem service to 3 Mbps from 1.5 Mbps. The upgrade is provided at no additional cost to the end user. Upstream speeds will remain the same at 256 Kbps. The upgrade has occurred in 14 U.S. markets and will be expanded to all Comcast markets based on technical readiness.