Telephony delays hit Comcast

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Investor concerns that Comcast is lagging its cable industry peers in the provision of telephony services – an essential part of the popular “triple-play” bundle increasingly available to consumers – on Thursday pushed shares in the world’s largest cable operator lower.

By the close in New York, Comcast shares were down 3.3 per cent to $27, close to their lowest-ever in terms of valuation. Concerns about a price war between cable and telecommunications companies as they extend television, internet and tele
phony services to the same customers have pushed down valuations across the sector.

Aryeh Bourkoff, analyst at UBS, said: “Comcast is taking a bit longer [than Time Warner Cable or Cablevision] to get the full benefit of the bundle.”

Comcast reported consolidated fourth quarter revenue of $5.41bn, versus a consensus forecast of $5.71bn. Earnings before interest, tax, depreciation and amortisation were $2.17bn, versus a consensus forecast of $2.18bn. Net income fell by 69 per cent relative to the fourth quarter of 2004, Comcast said, adding this reflected a fall in investment income and a higher tax rate.

Craig Moffett, analyst at Sanford Bernstein, said: “There are a couple of clear positives. In cable, basic subscriber adds of 60,000 met our expectations and beat consensus, and digital subscriber adds were slightly higher than expected.”

In addition, a new $5bn share repurchase programme would be “reassuring to investors”, Mr Moffett said.

However, Comcast’s cable revenue guidance growth of 9-10 per cent for this year appeared to be lower than its rivals. Time Warner on Wednesday reported strong results for its cable business and revenue grew 13 per cent, whereas Cablevision has reported growth of 15-16 per cent.

Comcast began rolling out telephone services over its cable system later than many of its rivals. “Investors have been waiting for two years for [telephony] to ramp up,” said Mr Moffett. “It now looks like they will have to wait another year.”

Brian Roberts, chairman and chief executive, said the cable group would this year be able to offer a triple-play bundle to more customers than ever. Comcast has reorganised its marketing efforts, which are now integrated to better focus on bundled offerings rather than organised by product line.

Additional reporting by Paul Taylor in New York

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