Comcast Profit Beats Estimates With More Internet Customers

Jul 22, 2014 4:12 pm ET

(Updates with closing share price in fifth paragraph.)

July 22 (Bloomberg) -- Comcast Corp., the U.S. cable company seeking to acquire its next-largest rival, reported second-quarter profit that topped estimates as more customers signed up for high-speed Internet service.

Earnings, excluding some items, were 75 cents a share, beating the 72 cents that analysts projected on average, according to estimates compiled by Bloomberg. The Philadelphia- based company added 203,000 broadband customers, according to a statement today, more than the 159,000 that four analysts estimated on average.

As pay-TV operators see fewer new video customers, the industry is looking to acquisitions to get bigger and keep pace with surging broadband growth. The average monthly bill for Comcast’s video, Internet and phone subscribers rose 4.5 percent, and investors are looking for further gains if regulators approve its merger with Time Warner Cable Inc. After Comcast announced the $45.2 billion deal, AT&T Inc. said it would buy satellite-TV service DirecTV for $48.5 billion.

“The acquisition of Time Warner Cable will create far greater synergies than what has been publicly discussed by either company,” Todd Mitchell, an analyst at Brean Capital LLC, wrote in a research note today. He said Comcast is managed “far better” than Time Warner Cable.

Comcast shares rose 1.5 percent to $54.63 at the close in New York. The stock has gained 5.1 percent this year.

TV Consolidation

Consolidation isn’t just heating up among television distributors; programmers are also looking to combine. Rupert Murdoch’s 21st Century Fox Inc. last month made a bid for Time Warner Inc. While the offer was rejected, major TV programmers are still evaluating how to respond to mergers on the TV distribution side that could affect their negotiating stance when selling licensing rights to the cable and satellite operators.

Comcast, which also owns NBCUniversal, said it has no need to add more assets to its own programming business.

“We certainly don’t think we need to bulk up in content,” NBCUniversal Chief Executive Officer Stephen Burke said on a conference call today.

He said NBC started selling advertising across its broadcast and cable networks together, a new strategy that helped it increase upfront advertising purchases this year by 10 percent.

TV Decline

Comcast’s second-quarter net income rose 15 percent to $1.99 billion, or 76 cents a share, up from $1.73 billion, or 65 cents a share, a year ago. Revenue increased 3.5 percent to $16.8 billion, while analysts estimated almost $17 billion.

The average customer bill rose to $137.24 a month. More than a third of Comcast’s customers subscribe to all three services: Internet, voice and video.

The company lost 144,000 TV subscribers in a seasonally weak period when college students typically disconnect their TV service for summer vacation. Mitchell estimated a loss of 120,000 video customers.

The urge to merge is becoming more apparent as the number of Americans paying for television fell for the first time last year. With the traditional pay-TV market in decline, that’s left the phone, satellite and cable companies to focus on retaining customers instead of chasing new ones.

In the case of Comcast, Chief Executive Officer Brian Roberts has focused on keeping customers by updating technology to better compete against popular, and cheaper, streaming services such as Netflix Inc. The cable operator has aggressively marketed its X1 set-top box that takes elements of online interfaces, such as easier-to-use program guides and cloud storage, that appeal to younger viewers.

Sales at Comcast’s NBCUniversal group were little changed at about $6 billion, as NBC became the most-watched broadcast network in prime time among 18- to 49-year-olds. The film division, which includes the Universal studio, generated $1.18 billion in sales, a 15 percent drop from a year ago when the studio released the sixth film in the lucrative “Fast and Furious” franchise.