Comcast's Q1 fueled by price hikes
Price increases on video service and customers upgrading to HD packages and digital video recorders (DVRs) helped boost Comcast’s first quarter profit by 17 percent.
Revenue growth was driven largely by video rate hikes and increased prices on DTAs and DVRs. The company reported that programming expenses increased 8.5 percent in the first quarter. Subscribers ended up paying an average of $3.40 more per month for TV compared with the same period last year. The company said 12 million of its video customers, or about 55 percent, are HD and/or DVR customers.
Comcast lost 60,000 TV subscribers, compared to a loss of 37,000 in last year’s first quarter. Still, the most recent Q1 numbers broke a trend of diminishing video subscriber losses.
CFO Michael Angelakis said some of the losses appear to have been in response to higher prices; Roughly half the losses were from households that were taking only video.
“We continue to expect programming expenses to grow at low double-digit rates for full year 2013,” he noted.
Meanwhile, the company increased its broadband subscriber count by 433,000 in the quarter. It also added 211,000 new voice customers, a 29 percent increase over the last year, which Angelakis said was the result of continued success in converting one- and two-product customers to triple play, and also in acquiring new triple play relationships.
“We’re making steady headway in the rollout of new products, and we’re about to significantly increase our marketing of X1, so that by the year end, it will be available and marketed nationwide. At the upcoming cable convention in June, we will demonstrate the next generation version of X1, really showing how we are accelerating innovation on this exciting new platform,” Roberts said. His quotes are from a transcript of the company’s conference call with analysts, provided by Seeking Alpha. 
Comcast Cable president Neil Smit added that with the X1 product, Comcast is “in about 30 percent of the country now, and launching markets on a continuous basis. We’ll be at about 50 percent of the footprint by the end of Q2.”
Smit also said, “The X1, the results have been very positive. We’ve seen increases in overall VOD views, especially in the transactional VOD. HD viewing is much higher due to the autotune switch. The customer sat is higher, and the most viewed features are the mini guide and the last nine channels that you used.”
Comcast executives noted that the recent “watch-a-thon” promotion was highly successful, and was likely to be repeated.
Business services had 27 percent growth in revenue in the quarter, and ongoing momentum as it expanded services to small businesses and its presence in the midsize market, CEO Brian Roberts said.
With regard to the relatively new home services market, Smit said, “Our home product has rolled out nationally. It’s starting to gain momentum. Interestingly, a relatively high percentage of the customers who have never had a security service are taking home, and 40 percent of those are new to Comcast, and 70 percent of those are taking triple play or taking quad play,” Smit continued.
Comcast reported that first quarter capital expenditures in the quarter increased $38 million, or 3.6 percent, to $1.1 billion, equal to 10.7 percent of cable revenue, versus 11 percent in the first quarter of 2012. “We continue to expect that, for the full year 2013, cable capital expenditures will increase by approximately 10 percent, with capital intensity increasing slightly,” Angelakis said.
Angelakis pointed out that the company is improving operations efficiency as well, by adopting technologies and techniques that significantly reduced truck rolls, minimized customer calls, and encouraged self-installs.
“Customers continue to elect self-installations, which in the first quarter accounted to 38 percent of our total installations, compared to 24 percent in the first quarter of last year. In addition, we now have 29 percent of our customers managing their accounts online,” he reported.
The company sounded highly pleased about its relationship with Verizon Wireless, and signaled that ongoing benefits are likely to ensue from the collaboration. According to Smit: “We work well together. We identify products that would be opportunities for both of our customer bases. The focus to date has been on getting the infrastructure set. So we’re in 500 Verizon stores, and about 1,000 agent stores. We’ve got a common billing system, so the agents in their stores can bill and sell things in a manner that they’re familiar with. We’ve got some products lined up, a product roadmap, and HSD is certainly a good opportunity in there that we want to leverage, but so is video. The data usage on mobile phones is very high for video, and we think there’s a real opportunity there as well. So great partnership, more to come.”
Comcast earned $1.44 billion, up from $1.22 billion in the like quarter a year ago.
The company's shares rose 86 cents, or 2.1 percent, to $42.17 in midday trading. At the open, they hit $42.47, near the all-time high of $42.61, hit a month ago.
Excluding a gain of 3 cents per share due to the sale of some airwaves licenses to AT&T, earnings were 51 cents per share. That was a penny higher than the average forecast of analysts polled by FactSet.
Revenue rose 2.9 percent to $15.31 billion. Analysts were expecting half a percent more, at $15.38 billion.
Comcast noted its revenue didn't grow as fast as usual because it broadcast the Super Bowl last year, but didn't this year. Excluding that effect, revenue would have grown 4.7 percent, it said.
At NBCUniversal, revenue fell 2.4 percent compared to last year's quarter, when NBC aired the Super Bowl. CBS aired it this year. However, NBCUniversal's operating cash flow, a measure of profitability, rose. It was helped by the success of "Les Miserables" theaters, but was held back compared to last year by the later launch of the latest season of hit TV show "The Voice" as compared to last year.
As of March, Comcast owns all of NBCUniversal. It bought the 49 percent it didn't own from General Electric Co. for $16.7 billion. It bought it initial stake in 2011 and was planning to buy the rest over time, but announced in January that it was buying out GE years ahead of schedule.
– The Associated Press contributed to this report.