Philadelphia, PA-based cable giant Comcast issued its Q1 06 earnings results this morning showing strong numbers across the board. The fine performance of the nation’s cable top operator during the quarter can be boiled down to three things: speed, voice and VOD.
Comcast posted revenue of $5.6 billion, up 9.5% year-over-year and 3.3% sequentially. Operating cash flow advanced 11% year-over-year and 2% sequentially to $2.2 billion. Free cash flow (cash flow less capex — meaning money in the pocket) soared by 136% year-over-year to $775 million.
While these results are in line with what Comcast typically reports, the first quarter of 2006 was particularly strong in two key areas. First, high-speed data subscriptions posted a Q1 record growth rate, with Comcast adding 437,000 net new customers, reaching a total of 8.9 million subscribers by quarter’s end, or slightly more than 21% of total homes passed.
This growth is noteworthy because Comcast’s high-speed service is far more expensive, but far faster, than that of the company’s telco rivals. In fact, company executives noted during Comcast’s earnings call that speed sells.
“We think our message on speed superiority rings true,” Comcast Cable President Steve Burke said, noting that Comcast is picking up as many new high-speed customers from DSL as it is from AOL’s dial-up service. Around 34% of Comcast’s new data customers were defectors from DSL, compared to only about 23% a year ago.
In an intriguing statement, Burke also said that Comcast will boost its broadband speeds again later this year, but in a manner that is unexpected. “You can assume we will be increasing our speeds. Second half of the year we have an implementation that will allow us to increase our speed in ways we’ve never done before.”
Also helping to boost Comcast’s financial performance was the company’s digital voice, or VoIP service. Comcast added 211,000 net new digital voice customers during the quarter, raising the total VoIP subscriber base to 416,000 or 2.2% of the homes capable of buying that option. (Comcast is allowing its circuit-switched voice offerings to continually shrink).
Burke said that there is a very high correlation between digital voice and high-speed data subscriptions, with voice customers opting to add broadband service. Approximately 75% of the Comcast Digital Voice customers buy the full triple-play service of voice video and data, while 23% to 24% of voice subscribers buy at least two services.
CEO Brian Roberts has high hopes for the voice product to be an engine for growth. “This is just the beginning of the telephone era,” he said. “This is going to be a sustained growth even in markets that have been at it a little while for us.”
Comcast will roll out digital voice to five million more homes in Q2, and plans to end the year with 30 million voice-capable homes passed.
Digital subscriptions also surged ahead, with Comcast adding 340,000 net new digital customers during the quarter, 70% more than were added during the year-ago quarter. Comcast ended Q1 06 with 10.1 million digital subscriber or 47% penetration of basic customers.
Burke praised VOD for helping to spur digital (and basic) subscriber growth. “There is no question that when our customers have and use on demand they have a better experience than customers who use satellite,” Burke said. During the quarter, six million homes used Comcast’s VOD, up 50% over the four million homes using the on-demand option in Q1 05.
| Comcast Key Statistics | |||||
| Subscribers and Penetration | 1Q05 | 2Q05 | 3Q05 | 4Q05 | 1Q06 |
| Homes passed | 41,000,000 | 41,200,000 | 41,400,000 | 41,600,000 | 41,800,000 |
| Basic cable subs | 21,525,000 | 21,448,000 | 21,409,000 | 21,449,000 | 21,495,000 |
| Basic cable penetration | 52.6% | 52.1% | 51.8% | 51.5% | 51.4% |
| Pro Forma annual sub growth | 0.0% | -0.1% | -0.4% | -0.5% | -0.1% |
| Net Subscribers Added | (29,000) | (77,000) | (46,000) | 40,000 | 47,000 |
| Total Revenue Generating Units | 39,024,000 | 39,523,000 | 40,240,000 | 41,079,000 | 42,044,000 |
| Digital Video | 1Q05 | 2Q05 | 3Q05 | 4Q05 | 1Q06 |
| Digital subscribers | 8,856,000 | 9,140,000 | 9,447,000 | 9,789,000 | 10,129,000 |
| Estimated growth in digital subs | 200,000 | 284,000 | 307,000 | 342,000 | 340,000 |
| Penetration of total basics | 41.1% | 42.6% | 44.1% | 44.6% | 47.1% |
| Digital set-top boxes | 13,365,000 | 13,859,000 | 14,398,000 | 15,052,000 | 15,657,000 |
| High Speed Data | 1Q05 | 2Q05 | 3Q05 | 4Q05 | 1Q06 |
| HSD subs | 7,408,000 | 7,705,000 | 8,142,000 | 8,520,000 | 8,957,000 |
| Quarterly net sub adds | 414,000 | 297,000 | 437,000 | 378,000 | 437,000 |
| Penetration of total HP | 18.1% | 18.7% | 19.7% | 20.5% | 21.4% |
| Monthly avg revenue per subscriber | $ 42.81 | $ 43.34 | $ 42.88 | $ 42.39 | $ 43.14 |
| Phone | 1Q05 | 2Q05 | 3Q05 | 4Q05 | 1Q06 |
| Comcast Digital Voice | |||||
| Available Homes | 16,290,000 | 18,833,000 | |||
| Subscribers | 204,000 | 416,000 | |||
| Penetration | 1.3% | 2.2% | |||
| Net Additions | 134,000 | 211,000 | |||
| Circuit Switched Voice | |||||
| Available Homes | 10,245,000 | 10,623,000 | |||
| Subscribers | 1,117,000 | 1,047,000 | |||
| Penetration | 10.9% | 9.9% | |||
| Net Additions | (55,000) | (70,000) | |||
| Source: Emerging Media Dynamics, Inc. analysis of company data. © 2006. | |||||
Cynthia Brumfield at 10:33 AM|Comments(0)
Blogs We Read
