Comcast Corp. showed strong growth in its core cable business with the addition of 363,000 high-speed internet customers in the third quarter, beating Wall Street's expectations and more than making up for its loss of 106,000 pay-TV customers.
"We surpassed 30 million customer relationships," Brian Roberts, chief executive of the Philadelphia cable giant, told analysts on an earnings call Thursday morning. He said the internet customer gains marked "the best third quarter in 10 years" for Comcast.
Comcast's NBCUniversal also delivered solid results. Revenue was boosted by political advertising flowing into MSNBC and other TV networks as well as FIFA World Cup soccer on its Spanish-language Telemundo network. However, Universal Pictures in Los Angeles posted a lower profit, in part because _ unlike last year _ the film studio did not have a blockbuster animated movie in theaters.
The numbers
Comcast reported net income of $2.9 billion, or 62 cents a share, up from $2.7 billion, or 55 cents, a year earlier. Revenue climbed 5 percent to $22.1 billion. The results beat Wall Street estimates. Analysts polled by FactSet had predicted earnings of 61 cents a share and revenue of nearly $21.9 billion.
At Comcast Cable, which includes the high-speed internet, pay-TV and phone service businesses, revenue was up 3.4 percent at $13.8 billion _ driven by the increases in high-speed internet customers. (Advertising revenue from cable operations climbed 15.2 percent because of increased political ad spending.) Adjusted earnings before interest, taxes, depreciation and amortization, the company's metric for profit, was up 7.6 percent at $5.6 billion.
At NBCUniversal, revenue climbed 8.1 percent to $8.6 billion. Its adjusted earnings before interest, taxes, depreciation and amortization slid 8.5 percent to $2.1 billion. Universal Pictures generated revenue of $1.8 billion, a 3.8 percent increase over the year-earlier period, but it had considerably higher costs. Film studio profit fell 44.2 percent to $214 million.
The takeaway
Comcast benefits from being a market leader in selling subscriptions for internet service and pay TV. Owning a leading content company, NBCUniversal, also helps. The company's earnings report came the day after AT&T Inc. reported huge losses in its satellite TV business, DirecTV, leading investors to brace for another bitter pill. But Comcast's pay-TV defections were not as bad as Wall Street had feared. Analysts figured that Comcast would lose 153,000 pay-TV customers in the quarter, according to FactSet.
Overall, the company posted a net addition of 288,000 customers in the quarter.
The outlook
The third quarter was full of high drama for Comcast as it tried _ and failed _ to outmuscle Walt Disney Co. in a struggle to buy much of Rupert Murdoch's 21st Century Fox. Disney came away with that prize. But Comcast was dogged in a second bidding war, this one against Fox and Disney for control of European pay-TV giant Sky. Comcast won control of Sky with a $39-billion bid. Investors worry that Comcast might have overpaid by $5 billion to $10 billion.
Nonetheless, Roberts said he was thrilled with the acquisition of Sky, which Murdoch helped launch in 1989 and build into a pay-TV juggernaut with valuable content and sports rights. Roberts believes the acquisition of London-based Sky could be a game changer. Acquiring Sky nearly doubles Comcast's customer base and gives Comcast a toehold in some of the most prosperous countries in Europe: Britain, Ireland, Germany, Austria and Italy.
"Sky was probably mispriced _ and misunderstood," Roberts told analysts. "Rupert Murdoch figured a long time ago that television was going to transform itself. He understood that customers wanted choice and they wanted the best provider."
