Comcast increased its 2003 guidance for subscriber growth and financial performance following significant gains during Q2, which normally is a seasonally slow quarter. Pro forma Comcast Cable revenue for the quarter was $4.379 billion (not including QVC), representing a 9.2% increase over the $4.009 billion in the second quarter of 2002. QVC's consolidated revenues for the quarter were $1.101 billion, an increase of 11.3%. Last month, Comcast agreed to sell its 57% stake in QVC to Liberty Media for $7.9 billion. Some highlights for the quarter:
- Comcast added 12,100 basic subscribers, which the company described as a "remarkable turnaround" from the loss of 133,300 subscribers in the same quarter last year. In Q1, Comcast added 56,900 basic subscribers. The company feels it has reversed the previous losses to DBS TV providers. For the second time this year, Comcast is increasing guidance for basic subscribers to 125,000 to 150,000 net additions. Previous guidance was for 75,000 to 100,000 net additions.
The digital cable customer base grew by 19.4% year-over-year to 6.950 million subscribers. Comcast said it is focusing heavily on the profitability of digital services rather than fast subscriber growth.
VOD is now available to 20% of subscribers and is expected to increase to 50% by the end of this year as Comcast accelerates the VOD deployment into new markets during the second half of 2003.
HDTV is available to 54% of the customer base at the end of Q2 and is expected to increase to 65% by year end.
The company added 350,900 cable modem users, a pro forma increase in net additions of 32.8% over the same period one year ago, to finish Q2 with nearly 4.4 million subscribers, representing a penetration rate of 13.7%. Cable modem ARPU is now $43.34, up 3.6% compared to a year ago. More than 81% of the homes in Comcast's footprint, or 32.1 million homes, are now eligible for cable modem service. Growth in the second half of 2003 is expected to be driven by continuing expansion of the service's footprint, to 34 million homes, expanded retail distribution through more than 3,800 retail outlets and a new "Instant Install" marketing initiative. Comcast expects to add 1.6 million cable modem users for all of 2003.
Comcast does not plan to reduce cable modem pricing, saying the current level is "fair" especially compared to AOL dial-ups users with a second home phone line. The company is looking to retail channels and partners to increase subscriber numbers. Comcast is also looking to increase average cable modem downlink speeds from 1.5Mbps to 3.0 Mbps in its major markets. Comcast believes it can increase these speeds without bearing a major cost.
Comcast had under 1.4 million cable telephony customers at the end of Q2, down by 52,000 compared to the previous quarter. Comcast lost 20,000 cable telephony subscribers in Q1. The company said it is focusing on profitability of its cable telephony operations by eliminating bad debt customers. Comcast believes it will lose a total of 150,000 cable telephony customers for all of 2003.
CAPEX for Q2 was $1.05 billion as Comcast Cable completed the upgrade of nearly 16,000 miles of plant to end the quarter with more than 89% of its footprint upgraded to provide two-way digital and high-speed Internet services.
Newly-acquired AT&T Broadband systems are now 85% upgraded to deliver two-way digital cable and high-speed Internet service, up from 80% at the end of Q1. The company said the integration is ahead of its expectations in every metric.
Cable cash flow margin was 36.5% for Q2 and annualized cable operating cash flow per subscriber was nearly $300.
