After 100 days of operating as a combined company, Comcast claimed significant progress in integrating the networks, slowing subscriber losses and addressing its $30.5 billion debt burden. The company attributed an improved outlook to its ability to stop subscriber losses to direct satellite TV and to growth in digital cable and cable modem services. Comcast is forecasting zero customer loss (net) for 2003, compared with a net loss of 412,000 customers in 2002. Cable modem subscribers are expected to increase to 5 million this year, compared to 3.6 million at the end of 2002. However, Comcast expects its circuit-switched cable phone business to slow or decline in 2003. Some other highlights of the Comcast quarterly update:
- Proforma cable revenues for Q4 were $4.152 billion, an increase of 11.0% from the $3.740 billion for 2001. Pro forma operating income (EBITDA) for the quarter was $1.047 billion, an 8.9% increase over the $962 million for the same period of 2001.
- Video revenues increased 4.5% over the prior year quarter to $2.882 billion, reflecting the impact of continuing strong demand for Digital Cable, offset by subscriber losses in the newly acquired AT&T Broadband cable systems. During Q4 Comcast lost 9,100 cable subscribers, reflecting growth in Comcast’s historical cable systems of 40,600 subscribers (a twelve-month trailing growth rate of 0.8%) offset by a loss of 49,700 subscribers in the newly acquired AT&T systems. Comcast had 21.305 million cable subscribers at year-end 2002, a pro forma twelve-month trailing loss of 1.9%. The figure includes 6.6 million Digital Cable subscribers, an increase of 29% year-over-year for digital service. By year-end 2003, nearly 50% of Comcast customers will have access to VOD and HDTV.
- High-speed Internet service revenue increased 67% over the prior year quarter to $434 million, as a result of a 50% increase in the customer base and an 11.1% increase in average revenue per subscriber. The company ended 2002 with 3.6 million high-speed Internet subscribers, a pro forma increase of nearly 50% over year-end 2001, and representing a 12% penetration rate. Comcast is adding on average 28,200 cable modem subscribers per week. The service is currently available in 75% of the Comcast footprint.
- Cable phone revenue totaled $225 million, a 36% increase from Q4 2001 reflecting significant unit growth. The company ended the year with 1,438,000 cable phone subscribers, up by 393,000 subscribers. However, Comcast said it would now focus on the economics of the service rather than unit growth. For 2003, Comcast forecasts that the number of cable phone subscribers will remain flat or decline by up to 150,000. The company said it would retain its current cable telephony footprint but would not expand it to other regions. For markets currently offering cable telephony, Comcast plans to reduce its marketing. As for its longer term strategy, Comcast said telephony would remain “on-hold” for the next 18 months or so while it works on VoIP. The current VoIP deployment in Philadelphia will go ahead.
- Advertising revenue increased 15% over the prior year quarter to $297 million.
- For its financial outlook, Comcast predicted 2003 EBITDA of $6.2 to $6.3 billion, which represents a growth rate substantially above the 20% growth rate the company had previously anticipated and above the $4.9 billion generated prior to acquisition related costs in 2002. The company forecasts having approximately $25-26 billion in debt at the end of 2003, down from $30.5 billion. Employee headcount is expected to be 34,900 at year-end, down from 40,000 when the acquisition closed in November 2002.
- Comcast will cut its CAPEX spending to $4 billion in 2003, as compared to the previously issued guidance of $4.2 to $4.5 billion. In addition to $1.2 billion earmarked for cable plant upgrades, Comcast plans to spend $1.39 billion for customer premise equipment, $440 million in infrastructure equipment, $340 million for line extensions, $1.3 billion in other upgrades/rebuilds, and $530 million for support systems. Comcast expects 90% of the newly acquired AT&T systems will be upgraded to deliver two-way digital and high-speed Internet services by year-end.
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