There were two big announcements from Comcast (NSDQ: CMCSA) this week: On Monday, the company confirmed that it would not be bidding in the 700 MHz. Then yesterday, it issued a broad warning, lowering growth estimates on economic and competitive concerns (release). At the UBS Global Media Conference, CFO Michael Angelakis stated that the latter announcement was made so that the company could have an “honest” conversation here today, based on the latest information the company has about its business. Lots more after the jump…
Earnings guidance: Although Comcast is anticipating lower subscriber numbers, lower cash flow and higher capex, Angelakis at first sought to play down the severity of the latest announcement. The company is still seeing double digit operating cash flow, with much of the new spending on stuff like HD-DVRs, which hopefully will increase revenue and reduce churn. There will also be more capital spent on customer service. The economy: “Tale of two cities — first quarter we had remarkable momentum. When we looked at the business and the economy, we were incredibly bullish.” Starting in Q3 the company has seen softness, associated with economy and competition. The economy affects the company in a number of ways. Homes passed is a key metric, so if there’s an increase in home vacancies, that’s a problem. There have also been increased in churn and customer creditworthiness — “That indicates that there’s an economic issues… this is not a robust economy.” Looking forward, economic issues could contribute to customers canceling things like phone service or HBO. Another tactic that the company is going to implement is the dual play: voice and data. Angelakis notes that the company is undergoing “a cultural shift from a video-centric company.”
Wireless: “When we think about wireless — and it’s something we do think about, everyone in this room has a phone or PDA — we think about the best customer experience.” “We don’t feel a lot of pressure to have a wireless me-too product tomorrow”. Company is taking its time to figure things out, but it already has spectrum. In the meantime, it’s better to focus on what it can do with AWS. Lots of turbulence still in the market: Google, (NSDQ: GOOG) open access.
Competition: “I think we’re really well positioned.” Company needs to re-take the high ground on HD. Because the company has positioned itself around the triple play, satellite has been able position itself as the HD leader. Verizon: “Verizon (NYSE: VZ) has done a good job… we will lose basic customers… [I] would like to know their SAC costs.” “If you build a network, you will take a certain amount of share.” “The way we’re thinking about it operationally is competition will increase and we have to respond.” Right now, the company claims that the quadruple play from Verizon or AT&T (NYSE: T) as a big threat, at least not for the next few years.
Advertising: Advertising has been weak this year, in part due to automotive. 2008 is expected to be better on political spending.
Bandwidth usage: Comcast has seen a 10 percent penetration for a higher tier service in Portland, OR test. Company will launch a nationwide higher tier for customers wanting more bandwidth.
Acquisitions: “Taking a pretty disciplined approach… pretty inwardly focused.”