Comcast: 5 Million High Speed Subs Year-end

Cable provider Comcast’s merger with AT&T Broadband appears to be
moving along more quickly than expected. The newly-integrated company predicts five million high-speed Internet customers by year end.

In its first earnings release to reflect the merged cable companies, Comcast said its high-speed modem customers grew by 50 percent from the same time a year ago. By year-end, the company counted more than 3.6 million high-speed Internet subscribers among its merged systems, after adding close to 1.2 million new subscribers during the year. On Thursday, it said it expects to hit five million high-speed customers by the end of 2003.

Those numbers would place Comcast, the nation’s largest cable provider with 21.3 million subscribers, among the leaders with broadband subscribers too, in a cable industry that holds an estimated 70 percent share of the residential U.S. broadband subscriber base. According to Jupiter Research (which is owned by the same company that owns this publication) the residential broadband base is about 15.7 million subscribers.

Comcast has pledged to spend $4 billion over two years to upgrade its facilities, including $1.2 billion alone to build out more plants to deliver high speed Internet service and two-way services such as video on demand.

Thursday’s results at least validated those plans, which company officials had conceded in November when the merger closed were aggressive, given the $26 billion in debt it took on with the $30 billion acquisition of AT&T Broadband.

As part of its upgrade schedule, the company expects to add between 1.3 million and 1.4 million new high-speed Internet subscribers in order to hit its five million goal.

On the digital cable side, it said it would add close to 1 million new subscribers to finish up with 7.5 million digital customers out of its 21.3 million overall base.

“We are off to an extraordinarily fast start,” said Brian L. Roberts, president and CEO of the Philadelphia-based Comcast. As a result, he said he expects the company to bring in between $6.2 billion and $6.3 billion in cash this year, up 20 percent from similar measures for the prior year.

The outlook numbers came out as Comcast announced 2002 revenues (reflecting combined companies) from cable operations of $6.2 billion. Assuming the same company was operating at the same time last year, that’s a 12 percent increase.

For the fourth quarter, its revenues were $4.2 billion, up 11 percent from $3.74 billion in same time last year. Its overall loss narrowed too, to $51 million (3 cents per share), compared to a loss of $321 million, 34 cents per share, in the same quarter a year ago.

Analysts were pleased, as were investors who had bid up Comcast’s stock by over 5 percent Thursday afternoon to $27.89.

The Comcast results echoed recent optimistic outlooks on revenues from other cable providers such as Cablevision and Cox, both of which reported better-then-expected growth in broadband subscribers.

The numbers also support recent research that says the gap between broadband and narrowband is closing. A survey by Strategy Analytics, for example, said global sales of broadband modems in 2002 jumped by 52 percent to 26.3 million units.

The research firm’s estimates say that 27 percent of all U.S. Internet homes presently use broadband connections. By 2008, that number is expected to grow to 64 million subscribers or 59 percent of all U.S. homes.

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