Shares in Comcast, the largest US cable operator, fell sharply on Thursday after the cable operator disappointed investors with a decline in video subscriber growth and higher than expected predictions for capital expenditure.
The shares moved 5 per cent lower despite 10 per cent growth in revenue to $5.6bn in the third quarter versus the same period last year, boosted by strong growth in the number of digital cable and internet telephony customers as the switch to digital services accelerated.
Analysts said Comcast shares had risen this week following stronger than anticipated revenue growth at its competitors, like Time Warner Cable. This resulted in higher expectations for Comcast, too.
“With revenue growth for its competitors up 13.5 or 14.5 per cent, Comcast is lagging,” said Craig Moffett, analyst at Sanford Bernstein. Much of this was because Time Warner Cable had rolled out digital phone services before Comcast, and this was having a benefit in terms of overall customer spending. “Comcast was late to the voice party but they are catching up,” he said.
Comcast said its voice over internet protocol (VoIP) service, which is available to about 12m customers, was on track to add a further 250,000-350,000 subscribers by the end of the year.
Overall, Comcast lost 46,000 basic cable customers this quarter.
Third-quarter net income rose less than 1 per cent to $222m, or 10 cents a share, the same as in the same period last year.
Comcast raised its outlook for expected capital spending, noting that there had been stronger than expected demand for more expensive advanced set-top boxes including DVR (digital video recorders) and for high-
definition TV boxes.
As a result, it said full-year 2005 capital expenditure was expected to total $3.5bn, compared with a previous target of $3.2bn-$3.3bn. Free cash flow would grow
30 per cent instead of 35-45 per cent. Higher spending on content initiatives resulted in lower guidance for earnings before interest, tax, depreciation and amortisation growth.
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