Shares in CSG Systems International Inc. (Nasdaq: CSGS) shot up more than 13 percent Monday after the billing and customer care specialist announced a new deal with Comcast Corp. (Nasdaq: CMCSA, CMCSK) that will extend their relationship through 2012. (See CSG, Comcast Extend Deal.)

So, indeed, this isn't new, but it is news. CSG did not disclose financial terms, but the deal tacks on four more years to the previous contract, which was set to expire Dec. 31, 2008. Additionally, the new arrangement is based on subscriber-level, rather than revenue-related commitments. Under these "volume-based pricing incentives," costs on a per-customer basis will drop as more Comcast customer accounts are processed by CSG. CSG also agreed to cut pricing on "several of the higher volume tiers," according to an 8-K document the vendor filed today.

CSG likewise did not disclose the subscriber-level commitment tied to the new contract, but currently CSG processes about 15.5 million of the MSO's customers. Convergys Corp. (NYSE: CVG) and Amdocs Ltd. (NYSE: DOX) are among Comcast's other significant billing and customer care partners.

"It was Comcast's preference to have no financial revenue commitment in [this] agreement," said Randy Wiese, CSG's EVP and CFO, during a conference call Monday morning. "We were somewhat indifferent [over the terms], because it gets [us] the same economic value."

"We see that the real benefit of this contract is our ability to service Comcast for an extra four years," said CSG president and CEO Peter Kalan, noting that CSG managed to exceed the minimum levels of its current Comcast contract "by several hundred million dollars."

CSG generated roughly 27 percent of its revenues from Comcast for the first quarter of 2008. The vendor is also in the process of ironing out a renewal with its other major customer, Dish Network LLC (Nasdaq: DISH), but CSG doesn't expect to announce anything new with the satco until the third or four quarter of this year, according Kalan.

The extended contract gives CSG "increased visibility into our ongoing relationship with Comcast," Wiese said. In concert with the Comcast extension, CSG also reaffirmed its previous guidance for 2008, which includes revenues in the range of $467 million to $475 million, and earnings per diluted share of between $1.55 and $1.62. Looking ahead, the company said revenue growth of roughly 4 percent in 2009 "is reasonable," based on current visibility.

The Amdocs question
Although Comcast has an option to tack on CSG products and services beyond the existing footprint under the new deal, the MSO also has retained the right to consolidate to a single billing vendor or take some components in-house so long as the cable operator provides "sufficient written notification to CSG."

Kalan downplayed the significance of that, noting that CSG has added "modularity" to its platforms and invested in its systems to meet the various needs of its customers.

The 8-K document filed by CSG today also identified an added layer of protection for the vendor. Should Comcast opt to process fewer customer accounts on CSG's system than the committed amounts, "the monthly fees to be paid by Comcast will be based on the higher number of committed customer accounts for the applicable billing period," according to the 8-K.

Although CSG handles the "vast majority" of those needs in its Comcast deployments, "we recognize that the marketplace is changing, and we will look to evolve," Kalan added.

One analyst on the call asked CSG to address the risk the vendor would be exposed to should Comcast decide to migrate a portion of its customer base to a competing platform. "I wouldn't put too much emphasis that, because we have subscriber commitments, that there is an effort underway to say that those [subscribers] are going to be... shifted to an Amdocs solution," Kalan said.

CSG shares were up $1.54 (13.39%) to $13.04 each in midday trading Monday.

— Jeff Baumgartner, Site Editor, Cable Digital News