Light Reading
Operator sent a chill up Wall Street's spine this morning by vowing to boost capital spending markedly

Comcast Revs Up Capex

Alan Breznick
2/1/2007
50%
50%

Despite racking up another record-setting quarter and year of cable subscriber growth, Comcast Corp. (Nasdaq: CMCSA, CMCSK) sent a chill up Wall Street's spine this morning by vowing to boost capital spending markedly this year.

In reporting fourth-quarter earnings today, North America's largest MSO said it plans to spend a record $5.7 billion on cable plant upgrades and new service launches in 2007. That's up 24 percent from $4.6 billion in cable capex last year and up more than 40 percent from $4 billion in 2005.

The news stunned analysts, who had been expecting Comcast to spend $4.5 billion on capex this year. In a report today, analyst Craig Moffett of Sanford C. Bernstein & Co. Inc. noted the spending will cut into the MSO's free cashflow growth, keeping it flat despite higher revenues and income. He called the development "a clear disappointment."

But the news will likely cheer cable equipment suppliers. Jason Ader, analyst at Thomas Weisel Partners , argued in a research note today that such vendors as Arris Group Inc. (Nasdaq: ARRS) and Harmonic Inc. (Nasdaq: HLIT) stand to reap the benefits from Comcast's planned splurge. He sees boosts for Arris's CMTS and E-MTA businesses, as well as Harmonic's digital video encoder and VOD gateway products.

Of the projected $5.7 billion, Comcast officials said they will spend about 75 percent, or more than $4.2 billion, on rolling out new equipment for new products and services including VOIP, faster cable modems, high-definition TV (HDTV), video-on-demand (VOD), and commercial services. The rest goes to plant upgrades and to bandwidth expansion technologies including switched digital video, digital simulcasts, and fiber node splits.

Included in the capex pile are $120 million to $180 million to upgrade the recently acquired Adelphia Communications cable systems, and a $250 million investment to rolling out a new commercial VOIP product.

"We think we can capture market share now, and this is the time to extend our lead in the market," Comcast chairman and CEO Brian Roberts told analysts in the company's earnings call this morning. "We're going to invest capital to drive that growth."

Comcast executives trotted out colorful charts to buttress their case for the unexpected spending surge, showing 75 percent of that spending will be "variable and revenue-driven." The charts also show that the capital cost of each new revenue generating unit (RGU) will continue to fall, to $814 this year from $1,300 in 2005.

"We get great returns on this investment," said John Alchin, an outgoing (not to say flamboyant) CFO of Comcast. "We are seeing accelerated RGU additions supported by a capital investment with great returns, and our capex per new addition is projected to decline approximately 40 percent over a two-year period."

Comcast, which also plans to spend $250 million this year building its new corporate headquarters in downtown Philadelphia, unveiled the unsettling capital spending projections while trumpeting its latest gains in subscribers, revenues, and profits. The MSO set new quarterly growth records again as it continued to bask in the glow of its new VOIP product and triple-play bundle.

Topping off what its officials termed the company's "best year" ever, Comcast netted more than 1.6 million RGUs in the fall quarter. The gains include almost 1.5 million units in "historical" Comcast systems and another 150,000 in systems acquired from Adelphia and Time Warner Cable Inc. (NYSE: TWC)

The MSO's VOIP offering, known as "Comcast Digital Voice" (CDV), clearly led the way once more. Comcast signed up an industry-high 508,000 IP phone customers in the quarter, which translates to a rate of nearly 40,000 a week, to wind up the year with more than 1.5 million new phone subscribers.

As a result, Comcast closed out 2006 with a total of 1.855 million VOIP subscribers, only about 5,000 below cable industry leader Time Warner Cable. In their earnings call today, Comcast executives noted that the company has since cleared the 2 million customer mark, presumably moving it ahead of Time Warner.

Besides the record VOIP subscriber gains, Comcast also added 488,000 cable modem and a record 613,000 digital cable subscribers in the fourth quarter. In addition, it netted 110,000 basic cable subscribers, setting yet another quarterly record for the company.

Thanks to these gains, Comcast's fourth-quarter revenue jumped to $7.03 billion, up 30 percent from $5.42 billion in the year-earlier period. Likewise, its net income nearly tripled to $390 million, up from $133 million the year before.

Comcast officials said they expect to set new records again this year, projecting that they will add another 6.5 million RGUs. That total includes a projected pickup of 2.6 million VOIP subscribers.

— Alan Breznick, Site Editor, Cable Digital News

(0)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View
Flash Poll
LRTV Huawei Video Resource Center
IHS Analyst Discusses eLTE at CCW 2014

9|10|14   |   7:09   |   (0) comments


Thomas Lynch, associate director of critical communications at IHS Technology, talks about broadband in critical communications.
LRTV Huawei Video Resource Center
TCAA on Huawei eLTE: A Broadband Solution for Mission-Critical Communications

9|10|14   |   2:29   |   (0) comments


At CCW2014 in Singapore, the TCCA's Phil Kidner talks about the importance of broadband data for critical communications.
LRTV Custom TV
Spotlight on Cisco: SDN for Optical Networks

9|8|14   |   9:27   |   (0) comments


Cisco's Greg Nehib talks OpenFlow and more on the 'Software-Defined Networking for Optical Networks' panel at the Big Telecom Event in June 2014.
LRTV Custom TV
Cisco's Evolved Programmable Network (EPN)

9|8|14   |   4:05   |   (0) comments


A look at the various demos Cisco showed at Light Reading's Big Telecom Event highlighting Cisco's EPN innovation and how SDN and NFV technologies are enabling a variety of new services.
LRTV Huawei Video Resource Center
The Future of Ultra-Broadband, With Kevin Kelly (UBBF2014)

9|5|14   |   1:13   |   (0) comments


If you think the technological changes we've seen up to now are astounding, just wait until you see what the future has in store. Discuss upcoming breakthroughs with Kevin Kelly, Founding Executive Editor of Wired Magazine, at the Huawei Ultra-Broadband Forum on September 24.
LRTV Huawei Video Resource Center
The Inaugural Optical Innovation Forum in Nice

9|2|14   |     |   (0) comments


More than 170 attendees from network operators, service providers, analyst firms, and component companies from around the world convened in Nice in June for the inaugural Optical Innovation Forum, co-produced by Huawei and Light Reading.
Wagner’s Ring
Data Centers Drive Telcos Into the Future

8|28|14   |   2:20   |   (2) comments


Data centers are at the heart of key trends driving telecom -- network virtualization, the drive for increased agility, and the need to compete with OTT providers.
LRTV Custom TV
Why SPs Should Consider Cisco's EPN

8|27|14   |   5:40   |   (0) comments


Sultan Dawood from Cisco discusses Cisco's EPN, which enables SPs to build agile and programmable networks delivering new network virtualized services using Cisco's Evolved Services Platform (ESP).
LRTV Huawei Video Resource Center
Huawei’s Showcase @ Big Telecom Event 2014

8|26|14   |   2.56   |   (0) comments


SoftCOM is Huawei's framework for telecom business and network transformation. Haofei Liu, Solution Marketing Manager, Carrier Business Group, Huawei, showcases Huawei's SoftCOM architecture in this video.
LRTV Huawei Video Resource Center
Huawei @ BTE 2014: Director of Integrated Solutions on SoftCOM & NFV Monetization

8|26|14   |   4.43   |   (0) comments


Libin Dai, Director of Integrated Solutions, Carrier Business Group, discusses Huawei's SoftCOM and NFV monetization. Huawei believes that NFV monetization should be service-driven rather than network-driven, and that operators should have network transformation, service transformation and a compatible and collaborative ecosystem in place in order to deploy NFV.
LRTV Huawei Video Resource Center
Huawei @ BTE 2014: Director of US NFV Lab on CloudEdge & the Future of NFV

8|26|14   |   4.06   |   (0) comments


Sean Chen, Director of US NFV Lab at Huawei, discusses Huawei's new approach to NFV in open collaboration. Huawei believes that through Proof of Concept tests, it could help operators learn and communicate with the industry more effectively. Sean believes that successful implementation of NFV should have its values reaching to end users and discusses how Huawei's ...
LRTV Huawei Video Resource Center
Huawei's Highlights @ Big Telecom Event 2014

8|26|14   |   3.34   |   (0) comments


At the Big Telecom Event in Chicago Huawei showcases its high-level strategy, the SoftCOM architecture, which helps operators reduce the cost of ownership of their network infrastructure and generate additional revenue in the ICT service environment. Huawei showcases over 30 pilot programs from across the globe, focusing on the industry-leading commercial ...
Upcoming Live Events!!
September 16, 2014, Santa Clara, CA
September 16, 2014, Santa Clara, CA
September 23, 2014, Denver, CO
October 29, 2014, New York City
November 6, 2014, Santa Clara
November 11, 2014, Atlanta, GA
December 2, 2014, New York City
December 3, 2014, New York City
December 9-10, 2014, Reykjavik, Iceland
June 9-10, 2015, Chicago, IL
Infographics
A survey conducted by Vasona Networks suggests that 72% of mobile users expect good performance all the time, and they'll blame the network operator when it's not up to par.
Today's Cartoon
Vacation Special Caption Competition Click Here
Latest Comment
Hot Topics
Introducing 'The New IP'
Stephen Saunders, CEO and founder, Light Reading, 9/11/2014
AT&T to Launch WiFi Calling in 2015
Sarah Reedy, Senior Editor, 9/12/2014
Is Rackspace the Best Next Move for CenturyLink?
Ray Le Maistre, Editor-in-chief, 9/9/2014
Nokia Jumps Into 4G Small Cell Mosh Pit
Ray Le Maistre, Editor-in-chief, 9/8/2014
T-Mobile Accuses Huawei of Espionage
Sarah Reedy, Senior Editor, 9/9/2014
Like Us on Facebook
Twitter Feed