Cable operators’ latest earnings season kicks off this week with Comcast first out of the blocks on April 26 and a trio of analysts expecting big numbers from the nation’s biggest operator.
As the last major operator to introduce voice-over-Internet Protocol telephony in its systems, Comcast is expected to ride a big wave in the first quarter, with Sanford Bernstein & Co. cable and satellite analyst Craig Moffett predicting 545,000 voice customers will have been added through March 31.
That would be Comcast’s biggest quarter ever in terms of VoIP customer additions — its previous best was 508,000 in the fourth quarter of 2006. And it could be just the tip of the iceberg: Moffett believes quarterly VoIP additions could double for Comcast by next year.
In a report, Moffett compared Comcast’s VoIP rollout to how Cablevision Systems’ rollout performed earlier. Cablevision had more than 1 million VoIP customers at the end of 2006, but didn’t reach peak penetration levels until the second and third years of the rollout.
Comcast has noticeably expanded its VoIP footprint in the past year. For the last three quarters of 2006, the cable operator added to its base of VoIP-available homes by 13.6 million, putting a huge tailwind behind year-over-year growth, according to Moffett.
Moffett believes Comcast won’t begin marketing IP telephony across its entire footprint of 47 million homes until 2008 — although it will market the services to the vast majority of homes passed by the end of the year.
Comcast’s South Florida super cluster (about 4 million homes passed) represents its largest untapped phone market, according to Moffett. Earlier this month, Comcast announced a phased rollout of VoIP service in that state, with immediate availability in Broward County, a June rollout in Miami/Dade County and a fall rollout in Palm Beach, Fla. VoIP availability in its Northern Florida/Jacksonville cluster was announced in late 2005.
With a Cablevision-like trajectory, Comcast “could plausibly be adding 1 million VoIP subscribers per quarter by the start of 2008,” Moffett wrote.
That accelerated phone growth is expected to fuel Comcast’s quarterly financial results. Moffett expects revenue for the quarter to be about $7.45 billion (a 13% year-over-year increase) and operating cash flow to come in at $2.89 billion (a 19% increase).
He also expects the largest cable operator in the country to add 72,000 basic subscribers, 561,000 digital video customers and 461,000 high-speed Internet subscribers.
Other analysts shared Moffett’s enthusiasm.
Oppenheimer & Co. cable and satellite analyst Tom Eagan predicts Comcast will add 485,000 VoIP customers, 448,000 high-speed Internet customers and 590,000 digital video subscribers. Eagan was less optimistic regarding basic video additions at 43,000 for the first quarter.
Merrill Lynch media analyst Jessica Reif Cohen estimated that Comcast would add 610,000 VoIP customers and 70,000 basic video subscribers in the quarter. However, her estimates for high-speed data additions (494,000) and digital-video additions (598,000) outpaced the other two analysts’ predictions.
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At Time Warner Cable, scheduled to report its first-quarter results on May 2, Moffett predicts steady revenue and cash-flow growth (11% and 8.5%, respectively) in the quarter. He expects 222,000 voice additions; 286,000 digital additions; and 221,000 high-speed Internet additions. Basic subscribers should rise by about 27,000 customers in the quarter, Moffett predicts.
The other analysts were pretty much in line with Moffett, although Eagan predicts that Time Warner will continue to lose subscribers (14,000) in the period, largely due to integration glitches in its Los Angeles and Dallas systems, which the company picked up in its joint acquisition of Adelphia Communications with Comcast last year.
At Cablevision, which will release first-quarter results on May 3, VoIP subscriber additions are expected to slow down as the service matures, Reif Cohen expects the voice numbers to be strong enough to boost revenue 16% to $1.63 billion in the quarter and operating cash flow 18% to $449 million.
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