Comcast Sub Losses Fall for Fifth Straight Quarter

Comcast’s fifth consecutive quarter
of basic-customer improvement sparked talk
on a largely taboo topic in the cable sector in recent
years — positive video-customer growth.

Comcast blew analysts’ predictions out of the
water in the fourth quarter, losing a mere 17,000
customers in the period — well outpacing consensus
estimates of losses of 120,000 customers
and soundly beating the 135,000 video customers
it shed in the year-ago
quarter. It was the MSO’s best
basic-customer performance
in almost five years.

“A return to positive videosubscriber
growth — unthinkable
in consensus numbers
as recently as six months
ago — is now not only plausible,
but arguably likely,”
Sanford Bernstein cable and
satellite analyst Craig Moffett
wrote in a research note.
“That’s a huge change.”

If Comcast were to cross
the line into positive videosubscriber
territory this year,
it wouldn’t be the first major MSO to do so —
Cablevision Systems did it for three years
straight in 2004, 2005 and 2006. And smaller
MSOs like Insight Communications and Suddenlink
Communications have reported strings
of positive growth in the past few years. But
since 2002, the cable industry overall has lost
nearly 8 million basic-video customers. A positive
showing from Comcast would make it the
largest MSO to do so in about a decade.

That, according to Moffett, could go a long
way toward bettering investor sentiment for the
entire pay TV sector, which has been battered in
recent years by competitive threats from telcos,
satellite companies and online content.

“The psychological importance of videosubscriber
strength, not just for cable but indeed
for the whole pay TV sector, cannot be overstated,”
Moffett wrote. “The fear of cord cutting is fading,
and with it, so is the core bear argument.”


The strong performance — for the full year,
the cable division shed 460,000 basic customers,
a 40% improvement
over 2010 — helped push
Comcast shares to a new 52-
week high of $29.05 (a 6.6%
increase) on Feb. 15, and
the stock finished the day at
$28.52 each, up 4.7%.

It also had a positive effect
on other stocks in the sector.
Charter Communications
rose 3.7% ($2.20 each)
to $62.22; Time Warner Cable
was up 1.2% (91 cents)
to $76.83; and Cablevision
Systems increased 2.2% (32
cents) to $14.87 on Feb. 15.
Fueling Moffett’s optimism
are signals of improvement in the housing
industry. Housing starts in January were at a
seasonally adjusted annual rate of 699,000, a
1.5% increase from December, according to
the U.S. Census Bureau.

Moffett estimated in a research report that a
1% swing in new housing formation — in line
with historical norms — would translate into an
incremental increase of 1 million new subscribers
for the pay TV industry. Since cable typically
gets about 70% of pay TV gross additions, and
Comcast represents about 40% of the cable industry,
that could mean 300,000 homes added.

“A net swing of [about] 300K video subscribers
could easily make the difference between
positive and negative sub growth at
Comcast in 2013 (or, dare we now hope, in
2012 instead?),” Moffett wrote.

On a conference call with analysts, Comcast
Cable division president Neil Smit said
housing improvements had little to do with
subscriber performance. He credited it to superior
product offerings, strong execution by
its field operations team and a slowdown in
the rollout of telco video service. He estimated
that telcos rolled out video to 1.1 million
new homes in the Comcast footprint in 2011,
versus 2.5 million homes in 2010.

Smit stressed that he did not expect positive
video-customer growth in the first quarter,
but said that losses should continue to


“This is a surprise,” Miller Tabak media analyst
David Joyce said of Comcast’s subscriber
performance. He added that Comcast has
helped its cause by rolling out new products
and services. “It helps that they have been
innovating and offering a lot for customers
and trying to get a lot of on-demand content
available to them.”

Comcast also added 363,000 high-speed
data customers and 146,000 telephony customers
in the period.

Revenue at the cable operations was up
4.7% to $9.5 billion, and operating cash flow
increased 6.4% to $3.9 billion.

At its NBC Universal programming division,
cable networks revenue increased 5.3%
to $2.2 billion, and adjusted operating cash
fl ow rose 16.2% to $930 million. Overall at
NBCU revenue rose 1% to $5.7 billion and adjusted
OCF was down 3.9% to $1.1 billion.