Hitting a Triple in Growth

Comcast told an audience of investors and analysts that it expects double-digit revenue and cash-flow growth for at least the next three years at its biennial Investor Day last Tuesday.

The optimism is fueled by its triple-play bundle of voice, video and high-speed Internet services, as well as expected gains in advertising revenue from its Comcast.net Internet portal.

In the first quarter, Comcast reported record growth in adding digital cable, high-speed Internet and voice subscribers. Overall, Comcast reported 12% revenue growth and 14% operating cash-flow growth in the quarter. That was its 27th consecutive quarter of double-digit cash-flow growth.

“We aren't resting,” Comcast CEO Brian Roberts said at the meeting. “We are aggressively moving on all fronts — product development, marketing, customer service and technology,”

Leading the charge will be the digital voice service. Comcast added about 571,000 voice customers in the first quarter, increasing overall penetration to about 7% of homes passed. That penetration is expected to rise to between 20% and 25% by the end of 2009.

The phone product has driven growth in other products, said chief operating officer Steve Burke.

He said Comcast regularly reported additions of 2.6 million Internet or television customers per year, until it began to roll out the phone product in 2006. Once it began offering phone along with Internet and TV service, it ended up doubling that. For 2006, it added 5 million revenue-generating units, or monthly subscriptions to one of the services. Burke said that is expected to rise another 30% to 6.5 million in 2007.

That's had a big impact on revenue and cash flow. Burke said that for five quarters prior to the phone launch, average revenue growth was about 10%. After the phone launch, revenue grew 12%, or about $600 million. Operating cash-flow growth was about 12% for the five quarters prior to the phone launch, rising to 15% after the launch of voice.

“The movement in this business is unlike anything we've ever seen,” Burke said.

Roberts added that online advertising could be a $1 billion business in 5 to 6 years.

And Comcast Business Services president Bill Stemper estimated that revenue from commercial telecom could be a $2.5 billion business by 2011.