I thought it was really weird that Comcast hadn't -- until this afternoon -- issued a press release about its participation in the UBS Media Week confab tomorrow (very silly but I actually thought that this multibillion dollar corporation forget to issue a press release just as I forget to do things...). But, based on the press release that Comcast finally did issue this afternoon after the market closed, I know now that Comcast was sitting on some bad news for as long as it could.
The nation's top cable company is downgrading its earlier projections for 2007. It will far short on revenue generating unit (RGU) growth by about 500,000, meaning that it is either losing more customers in Q4 than it expected or it is failing to gain as many new customers as it had hoped. Comcast had earlier expected to add 6.5 million new RGUs for the year; now it says it will only add 6 million of these individual subscriptions.
As a consequence, cable revenue growth for the year will be 11%, and not the earlier hoped-for 12%, while cable operating cash flow will grow by only 13% instead of 14%. Adding insult to injury, Comcast's capex for the year will come in at $6 billion due to higher set-top costs, 5% higher than expected, squeezing free cash flow, which will end up about 80% of what Comcast generated in 2006, instead of 90%, which the company earlier predicted.
I don't remember a time when Comcast downgraded guidance and I've been following the company for longer than I care to admit. In fact, as late as October 25 when it issued its last earnings report, Comcast reaffirmed its 2007 guidance, although it did note that "the more competitive environment and less-robust economy may have a slight impact on our full year operating results."
Given the company's surprisingly sluggish performance during Q3, the downgrade isn't really a surprise. But there can be no arguing that the cable industry, forever in my mind guaranteed to grow, if not in terms of market share then in terms of financial performance and market cap, has entered a new era of diminishing expectations.
And one other thing the press release mentions. Michael Angelakis, Co-Chief Financial Officer will be speaking at the UBS event tomorrow.
Cynthia Brumfield at 5:39 PM|Comments(0)
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