Data additions drive Comcast’s Q1 revenue; video losses lessen
En route to a nearly 30 percent profit increase in the first quarter, Comcast slowed the bleeding of its basic video subscriber losses while it continued to add high-speed data customers.
Comcast lost 37,000 basic video subscribers in the quarter, which was the sixth consecutive quarter it curbed its video losses, to bring its total number of customers to 22.29 million. In the same quarter a year ago, the nation’s largest cable operator saw its video subscribers decline by 39,000. Several analysts had projected that Comcast would actually add basic video subscribers in the first quarter.
On this morning’s conference call, Comcast Cable President Neil Smit said video rate increases to 62 percent of its customers in the first quarter led to more service calls and “slightly higher churn,” but it also boosted average revenue per user (ARPU) by 4 percent.
Comcast added 439,000 high-speed data customers in the first quarter, which outstripped the 418,000 additions from the same quarter a year ago. All told, Comcast has 18.58 million data subscribers, but the cable operator’s Internet Essentials tier, which was designed to bring broadband services to low-income families, wasn't a significant contributor to the data subscriber additions, although last month, Comcast made it available to more families .
“In terms of Internet Essentials, it’s not a material contributor to the HSD, but we’re very pleased with the program,” Smit said. “It’s been exceptionally well received by the market, and we’re big believers in extending the Internet to people who may not be able to afford the higher-priced products.”
Comcast continued to add voice subscribers, with 164,000 net additions for a total of 9.5 million phone customers, but at a slower rate than the same quarter a year ago, when it added 260,000 new subscribers.
Business services continued to ring up cash for Comcast as it posted $541 million in revenue compared with $394 million a year ago. Comcast has made an effort to move up into the medium-size business category with services such as Metro Ethernet.
In the first quarter, Comcast’s net income rose 30 percent to $1.22 billion, or 45 cents a share, compared with $943 million, or 34 cents a share, a year ago. Comcast generated consolidated revenues of $14.9 billion, which was a 23 percent increase. According to FactSet, analysts were expecting Comcast to earn 42 cents per share on revenue of $14.4 billion.
Comcast’s free cash flow increased 37 percent in the first quarter to $3 billion.
"We are off to a great start in 2012, with strong revenue and cash flow growth and record quarterly free cash flow,” said Comcast Chairman and CEO Brian Roberts. “Cable's results show real momentum in high-speed Internet and business services and continuing improvements in video results and voice services. As we continue to drive innovation and bring the Xfinity brand to life, we're delivering more and better products and transforming the customer experience.”
Other first-quarter highlights and news included:
- Comcast is still testing My TV Choice in three markets . While Comcast has steered clear of branding My TV Choice as an a la carte offering, it does let subscribers pick from a few basic theme categories to add to their video packages.
“It’s a basic package with different genre bolt-ons,” Smit said. “We found that it works well, especially in retention, because it gives people choice, and that’s what people are looking for. We haven’t made a decision yet on how to roll it out on a broader basis, but we’re encouraged by the test.”
- Smit said Comcast’s Xfinity Home service is now available in 73 percent of its footprint, but it hasn’t been a contributing factor to RPU to date.
“It’s been really well received,” he said. “The churn out is very low. We had to figure out how to best sell it; it’s a more consultative sale, but now that we’ve figured that out, it’s going very well in the markets that we’re launching. We believe that it won’t be a material contributor this year [to RPU], but it’s a great product going forward and will become more material over time.”
- Comcast has reached nearly 400 million views a month for its video-on-demand service, which topped more than 370 million views a month from late last year.
“We’ve made real progress on on-demand,” said Steve Burke, CEO of NBCUniversal and executive vice president of Comcast. “I think back five, seven years ago, and to get to 400 million uses a month, let’s not just walk by that number. That’s dramatic customer behavior.”
- On the TV Everywhere front, Smit said Comcast has 35,000 choices in VOD, 225,000 online and 8,000 on its iPad app. Comcast is working to improve the search and navigation across its linear, VOD, online and DVR video content. In addition to improvements with its guide, the company’s next-generation, IP-based X1 platform  will allow customers to better find and remotely manage video content offerings.
- Smit said Comcast doesn’t currently have any plans to introduce usage-based pricing for its data services. He said the data subscriber increases were a reflection of customers’ overall satisfaction with its thresholds.
“We review various forms of pricing and structures all of the time,” he said. “We put the instrumentation in place should we decide to go to a different form of pricing.”