Comcast Slows Cord-Cutters Again

Even as Average Customer Bills Rise

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A summer show on Comcast's NBC.
A summer show on Comcast's NBC.

Comcast, the U.S. cable company seeking to acquire its next-largest rival in Time Warner, reported second-quarter profit that topped estimates as more customers signed up for high-speed internet service and fewer customers dropped their video cable subscriptions.

Earnings, excluding some items, were 75 cents a share, beating the 72 cents that analysts projected on average, according to estimates compiled by Bloomberg. The Philadelphia-based company added 203,000 broadband customers, according to a statement today, more than the 159,000 that four analysts estimated on average.

The company lost 144,000 TV subscribers in a seasonally weak period when college students typically disconnect their TV service for summer vacation, a smaller loss than in the quarter a year ago. But Mr. Mitchell, the analyst, had estimated a loss of 120,000 video customers.

Comcast last week apologized for a rude customer service representative who steadfastly refused to let a subscriber cancel his service, insisting that the subscriber justify his decision first. The subcriber recorded most of the call and posted it online, where it circulated widely and renewed complaints about customer service at Comcast.

Rising prices
As pay-TV operators see fewer new video customers, the industry is looking to acquisitions to get bigger and keep pace with surging broadband growth. The average monthly bill for Comcast's video, internet and phone subscribers rose 4.5%, and investors are looking for further gains if regulators approve its merger with Time Warner Cable. After Comcast announced the $45.2 billion deal, AT&T said it would buy satellite-TV service DirecTV for $48.5 billion.

"The acquisition of Time Warner Cable will create far greater synergies than what has been publicly discussed by either company," Todd Mitchell, an analyst at Brean Capital, wrote in a research note today. He said Comcast is managed "far better" than Time Warner Cable.

Before today, Comcast shares had gained 3.6% this year.

TV consolidation
Consolidation isn't just heating up among TV distributors; programmers are also looking to combine. Rupert Murdoch's 21st Century Fox last month made a bid for Time Warner. While the offer was rejected, many assume Mr. Murdoch has not given up, and major TV programmers are still evaluating how to respond to mergers on the TV distribution side that could affect their negotiating stance when selling licensing rights to the cable and satellite operators.

Comcast, which also owns NBC Universal, said it has no need to add more assets to its own programming business.

"We certainly don't think we need to bulk up in content," NBC Universal CEO Stephen Burke said on a conference call today.

He said NBC has started selling advertising across its broadcast and cable networks together, a new strategy that helped it increase upfront advertising purchases this year by 10%.

TV decline
Comcast's second-quarter net income rose 15% to $1.99 billion, or 76 cents a share, up from $1.73 billion, or 65 cents a share, a year ago. Revenue increased 3.5% to $16.8 billion, while analysts estimated almost $17 billion.

The average customer bill rose to $137.24 a month. More than a third of Comcast's customers subscribe to all three services: internet, voice and video.

The urge to merge is becoming more apparent as the number of Americans paying for TV fell for the first time last year. With the traditional pay-TV market in decline, that's left the phone, satellite and cable companies to focus on retaining customers instead of chasing new ones.

In the case of Comcast, CEO Brian Roberts has focused on keeping customers by updating technology to better compete against popular, and cheaper, streaming services such as Netflix. The cable operator has aggressively marketed its X1 set-top box that takes elements of online interfaces, such as easier-to-use program guides and cloud storage, that appeal to younger viewers.

Revenue at Comcast's NBC Universal group were little changed at about $6 billion, as NBC became the most-watched broadcast network in prime-time among 18- to 49-year-olds. The film division, which includes the Universal studio, generated $1.18 billion in sales, a 15 percent drop from a year ago when the studio released the sixth film in the lucrative "Fast and Furious" franchise.

~ Bloomberg News ~

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