Barrons this week is asking the all important question: why can’t country’s largest cable provider get no respect? It has finished a $38 million makeover that makes it one of the most cutting edge networks in the world, and yet Wall Street is shunning the stock, like Dodgers shunning the three-way Big Unit sale. Surprising because clearly Comcast has a network that is live and others – Bells in particular are just getting started and are expected to spend gobs of money for years to come.
Comcast and other members of its industry, meanwhile, seem poised to take a nice chunk of the residential phone market. The Bells, in contrast, are struggling to enter the video game, where they will be the fourth entrant, vying against cable and the two big satellite-television providers, EchoStar and DirecTV. Then why has Comcast stock been slipping? Because the Street fears that the Bells will strike back, eating into Comcast’s burgeoning free cash flow. “If you read the papers,” says Steve Burke, the company’s chief operating officer, “you would assume that the phone companies will take share, that the satellite companies will take share, and that our growth prospects for the next five or 10 years are going to be significantly worse than the last five or 10 years. But from where we sit, we think the opposite is true.”
Still, I think it might be too early to get bearish on the company. The company is on the cusp of unleashing its VoIP service, and is planning higher speeds for its broadband service. Its digital television and PVRs are ready for uptake. If it can match the success in VoIP Telephony that matches Cablevision or Cox, well then the Bells have a problem. And there is that whole bit about four-play.
Comcast could even team up with wireless providers to offer cellular service, too — a quadruple play. In part, the move would be defensive because the Bells have a strong position in cellular. Roberts imagines customers with dual-mode phones, operating on cellular frequencies on the road, then using WiFi and VoIP to make calls on the same number at home. Analysts theorize that the company could link up with Sprint/Nextel or T-Mobile, either of which would be eager to gain access to its 21.5 million subscribers.