& cplSiteName &

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        ADD A COMMENT
Light Reading’s Upskill U is a FREE, interactive, online educational resource that delivers must-have education on themes that relate to the overall business transformation taking place in the communications industry.
NEXT COURSE
Wednesday, July 27, 1:00PM EDT
The Changing Face of the Data Center World
Rodney M. Elder, Senior Solutions Architect, Equinix
UPCOMING COURSE SCHEDULE
Wednesday, August 3, 1:00PM EDT
The Central Office Re-Architected as a Data Center
Guru Parulkar, Executive Director, Open Networking Research Center, Open Networking Lab
Wednesday, August 10, 1:00PM EDT
Telcos & Open Source 101
Phil Robb, Senior Technical Director, OpenDaylight
Friday, August 12, 1:00PM EDT
The Role of Open Source in NFV
Jim Fagan, Director, Cloud Practice, Telstra
in association with:
From The Founder
In the first episode of a four-part series, Light Reading Founder and CEO Steve Saunders and Calix President and CEO Carl Russo drive around town discussing the disruptive mega-changes in the communications industry and where hope lies for service providers to meet the escalating demands of the cloud.
Flash Poll
Live Streaming Video
Charting the CSP's Future
Six different communications service providers join to debate their visions of the future CSP, following a landmark presentation from AT&T on its massive virtualization efforts and a look back on where the telecom industry has been and where it's going from two industry veterans.
From the Founder
The Russo Report: Driving Disruption

7|25|16   |   07:44   |   (0) comments


In the first episode of a four-part series, Light Reading Founder and CEO Steve Saunders and Calix President and CEO Carl Russo drive around town discussing the disruptive mega-changes in the communications industry and where hope lies for service providers to meet the escalating demands of the cloud.
LRTV Custom TV
NetScout: Maximizing Enterprise Cloud for Digital Transformation

7|20|16   |   04:53   |   (0) comments


Light Reading Editor Mitch Wagner talks to NetScout CMO Jim McNiel about maximizing the benefits of enterprise cloud and digital transformation while minimizing potential pitfalls with a proper monitoring and instrumentation strategy.
Women in Comms Introduction Videos
Ciena's VP Offers a Career Crash Course

7|20|16   |   4:14   |   (0) comments


How did Ciena's Vice President of Sales, Angela Finn, carve out her career path? Simple, she tells WiC. She stayed true to her company, customers and principles. She shares her advice for women on how to be authentic and credible, as well as for companies that want to make a real change to their culture and practices.
LRTV Custom TV
NFV in 2016: Part 2 – Climbing the Virtualization Maturity Curve

7|19|16   |   06:56   |   (0) comments


Many of the initial use case implementations are single-vendor and self-contained. The industry is still climbing the virtualization maturity curve, needing further clarity and stability in the NFV infrastructure (NFVi) and greater availability and choice of virtualized network functions (VNFs). Interoperability between NFVis and VNFs from different vendors ...
Telecom Innovators Video Showcase
Versa Networks' Kumar Mehta on SD-WAN Managed Services

7|19|16   |     |   (0) comments


In Silicon Valley, Steve Saunders sits down with Versa's Kumar Mehta for an interview focused on why service providers are building SD-WAN managed services, and how Versa's telco customers are innovating.
LRTV Custom TV
Juniper Networks & The Evolution of NFV

7|19|16   |   06:01   |   (0) comments


Senior Juniper Networks executives talk to Light Reading Founder & CEO Steve Saunders about NFV developments and the recent independent evaluation by test lab EANTC of Juniper's Cloud CPE solution.
LRTV Interviews
CenturyLink Goes Beyond Managed WiFi

7|19|16   |     |   (0) comments


CenturyLink's managed WiFi allows enterprises, such as retailers and resorts, to track guest WiFi usage in order to help them better communicate with customers.
LRTV Interviews
AT&T Launches Network Functions on Demand

7|17|16   |   05:26   |   (0) comments


Roman Pacewicz, Senior Vice President, Offer Management & Service Integration, AT&T Business Solutions, discusses the operator's launch of its Network Functions on Demand service.
LRTV Interviews
Enterprise Pitch for Ciscosson

7|14|16   |   04:43   |   (0) comments


After seven months of near silence, Cisco and Ericsson executives publicly discussed details on their extensive partnership. Among the tidbits shared by Martin Zander, VP, group strategy programs, Ericsson, and Doug Webster, VP service provider marketing, Cisco: The partnership was initially launched to serve the service provider market, but is already gaining ...
Wagner’s Ring
Cisco Faces Up to Hypercloud Threat

7|13|16   |   02:42   |   (0) comments


Facebook, Amazon and Google mostly don't buy branded technology for their networks – they build their own. That's a threat to Cisco – and its competitors too – which face potentially dwindling demand for their product. Is Cisco up to the challenge? Light Reading went to the annual Cisco Live conference to find out.
LRTV Huawei Video Resource Center
Building a Better Connected Russia

7|13|16   |     |   (0) comments


At UBBS World Tour 2016, Alla Shabelnikova of Ovum shares the findings of a white paper outlining the challenges and opportunities of broadband rollout in Russia.
LRTV Huawei Video Resource Center
The Global Video Business

7|13|16   |     |   (0) comments


At UBBS World Tour 2016, Roger Feng of Huawei shares insights on the future of video business.
Upcoming Live Events
September 13-14, 2016, The Curtis Hotel, Denver, CO
September 27, 2016, Philadelphia, PA
November 3, 2016, The Montcalm Marble Arch, London
November 30, 2016, The Westin Times Square, New York City
December 6-8, 2016,
May 16-17, 2017, Austin Convention Center, Austin, TX
All Upcoming Live Events
Infographics
Five of the Top 10 most targeted countries in Check Point Software Technologies' global Malware & Threat Index for Q1 2016 are in Africa.
Hot Topics
Ericsson 'Doubles' Savings Goal as Sales Slump
Iain Morris, News Editor, 7/19/2016
Kevin Lo's Move to Facebook: Sign of Things to Come?
Patrick Donegan, Chief Analyst, Heavy Reading, 7/20/2016
Verizon's Next With VNFs
Carol Wilson, Editor-at-large, 7/21/2016
Facebook Gets Its Drone On
Ray Le Maistre, Editor-in-chief, 7/22/2016
Is Dish Going Down the Drain?
Alan Breznick, Cable/Video Practice Leader, Light Reading, 7/21/2016
Like Us on Facebook
Twitter Feed
BETWEEN THE CEOs - Executive Interviews
There's no question that, come 2020, 5G technology will turn the world's conception of what mobile networking is on its head. Within the world of 5G development, Dr. ...
I've enjoyed interviewing many interesting people since I rejoined Light Reading, but William A. "Bill" Owens certainly takes the biscuit, as we say where I come from.
Live Digital Audio

Our world has evolved through innovation from the Industrial Revolution of the 1740s to the information age, and it is now entering the Fourth Industrial Revolution, driven by technology. Technology is driving a paradigm shift in the way digital solutions deliver a connected world, changing the way we live, communicate and provide solutions. It can have a powerful impact on how we tackle some of the world’s most pressing problems. In this radio show, Caroline Dowling, President of Communications Infrastructure & Enterprise Computing at Flex, will join Women in Comms Director Sarah Thomas to discuss the impact technology has on society and how it can be a game-changer across the globe; improving lives and creating a smarter world. Dowling, a Cork, Ireland, native and graduate of Harvard Business School's Advanced Management Program, will also discuss her experience managing an international team focused on innovation in an age of high-speed change.