1Q09 EARNINGS: Comcast

Digital Voice Leads the Way

Philadelphia, Pa.-based Comcast Corp. (Nasdaq:CMCSA) posted 1Q09 results that detailed a slowdown in revenue growth and a substantial increase in free cash flows.  Top line growth was led by gains in digital voice revenues while the increase in free cash flows was mainly due to a reduction in capital expenditures.

Growth in both voice and broadband revenues was off from prior periods.  Voice revenue was up 32.2% over 1Q08 while broadband revenue was up 9.1% YoY.  CMCSA is slowly losing video subscribers and expects the trend to continue based on the current economic conditions and increased competition.  The company also said that growth in broadband is slowing due to the market maturing.  As with other cable providers, advertising revenue was down from a decline in political advertising and a decline in the overall television advertising market, particularly the housing and automotive sectors.  CMCSA did increase ARPU from $106.70 at 1Q08 to $115.27 during 1Q09, which was attributed to the sale of more bundled services and premium services.  Looking forward, CMCSA expects growth will continue to be slow for the rest of 2009.

CMCSA has $4.1b remaining under its share repurchase program that was started back in 2007. The company had originally planned to be completed by the end of 2009.  With the company’s stock price dropping to multi-year lows at the end of 2008 and into the beginning of 2009, it would appear to be a great time to buy back stock.  But due to the current economic conditions and uncertainty in the capital markets, CMCSA ceased buying back stock in 4Q08 electing, instead, to preserve its cash. 

During 4Q08, CMCSA recorded a pretax impairment of $600m related to its $1.05b investment in Clearwire Corp. (Nasdaq:CLWR) in November 2008 (The Deal Advisor, 12/08, p.12).