Comcast 3d-quarter profit rises 38%

Comcast Corp., at least so far, seems insulated from the chaos engulfing large parts of the U.S. economy - from banks to auto manufacturers - as customers keep paying their pay-TV and high-speed Internet bills.

The company's third-quarter profit, which was announced today, rose 38 percent, and its free cash flow soared 77 percent.

But top executives cautioned that the company could slow its massive share repurchase program to conserve cash because of the credit crisis, and warned of slower growth.

Comcast maintained its full-year guidance for revenue growth and profit and boosted its forecast for free cash flow, which is a measure that shows the company is bringing in more money than it is paying out for expenses.

Revenue growth would be at the low end of its 8 percent to 10 percent full-year estimate, company executives said. Comcast recently increased its rates earlier than normal in parts of the nation.

In the Philadelphia region, the rate increases, which average 3.5 percent, take effect in November.

Third-quarter revenue at Comcast rose 10 percent, to $8.5 billion, and net income jumped 38 percent, to $771 million from $560 million in the year-earlier third quarter.

Per-share earnings were 26 cents, compared with 18 cents.

In its operations, Comcast lost 147,000 pay-TV customers, but it remained a formidable competitor to Verizon Communications Inc. and AT&T Inc. as it signed up 483,000 new phone customers and 382,000 Internet customers.

Comcast said it lost the pay-TV customers because of competition, the weak economy and, partly, the Texas Hurricanes Gustav and Ike. It attributed the loss of 15,000 pay-TV customers to the storms.

AT&T's U-verse pay-TV service is becoming more of a competitive threat than Verizon's FiOS service, a Comcast executive noted.

Comcast competes with Verizon or AT&T for pay-TV customers in one-fifth to one-quarter of its franchise areas.

"October is an unprecedented month," Brian L. Roberts, chairman and chief executive officer, said in a conference call. "It's not a great environment, and it's not getting any better."

Roberts said the company was prepared for a recession because of its strong balance sheet.

"We can comfortably say that we don't need to access the capital markets for the foreseeable future," Roberts said.

The company has almost $34 billion in debt, but only $2 billion will mature in 2009 and an additional $1.2 billion will mature in 2010. Comcast had $2.7 billion in cash at the end of the third quarter.

Michael J. Angelakis, chief financial officer, said the company charged against its profit $39 million for restructuring and employee severance in the third quarter. Comcast has said it will eliminate 300 employees from its eastern division.

Angelakis said he expected a similar restructuring charge in the fourth quarter.

In light of the financial uncertainty, Angelakis said the company would reevaluate its share-repurchase plans in late 2008 and 2009. The company said it was committed to maintaining the repurchase plans over time. He said he believed that the company's shares remained undervalued and that there were no plans to change the dividend policy.

At the close of trading today, Comcast shares were down 9.91 percent, or $1.68, at $15.28.

Stephen B. Burke, chief operating officer, said that Comcast had "marginally" fewer new phone and Internet customers in the third quarter and that there was "less propensity to upgrade" among customers.

The weak new-housing market has hurt new-subscriber growth but, coincidentally, the weak existing-home market is leading to fewer cancellations, Burke said.

Comcast said that the percentage of pay-TV customers enrolled in its digital service had advanced to almost 70 percent of its subscriber base and that the company was converting its cable systems to all-digital transmissions. The conversion will vastly expand the load-carrying capacity of its cable network, allowing Comcast to offer more channels and faster Internet service.