Comcast exec: $8.5B boost to shareholders won’t hurt

Comcast Corp.'s top financial executive, Michael J. Angelakis, says the Philadelphia company has the financial resources to boost shareholder returns without hurting its investment-grade credit rating or laying off employees.

The newfound generosity toward shareholders - which amounts to $8.5 billion in stock repurchases and new dividend payments - will be spent in the next two years.

Comcast announced the plans on Feb. 14 after criticism from Wall Street about its sagging share price. The stock fell 35 percent in a year, leading one big investor to call for Comcast chief executive Brian Roberts' ouster.

Angelakis said the nation's largest cable company is more worried about the economy and the weak housing market than competition from Verizon Communications Inc. and others.

The U.S. Labor Department added to those concerns with a report yesterday that the nation lost 63,000 jobs in February, the second straight month of job losses. On Thursday, the Mortgage Bankers Association reported that more than 2 percent of all U.S. mortgage loans were in the foreclosure process in the fourth quarter, the highest level since the group started keeping track in 1972.

"There has been a major dislocation in housing and that has had an impact on us," Angelakis said in a recent interview, noting the large number of vacant homes and foreclosures.

"Those could have been our customers," he said. The company is "not currently seeing an acceleration in the [housing] weakness," he added.

Comcast, with more than 24 million cable subscribers, is one of the most widely held stocks in the nation. Investors grew disgruntled when capital expenditures rose to $5.7 billion in 2007 from $4.5 billion in 2006. The company hired about 10,000 new workers in 2007 to fuel an expansion into business data services and improve customer service.

"The stock got hit because the market thought we were decreasing our potential to deliver free cash flow," said Angelakis, an executive vice president and chief financial officer. "I think we made the right decision, but Wall Street didn't."

Comcast shares fell 4 cents today to $19.67, on a day that the markets were down in reaction to the negative job numbers. The stock has traded between $29.41 and $16.11 in the last year.

Angelakis said he expects Comcast's revenues to grow 8 percent to 10 percent without acquisitions in 2008. Revenues in 2007 were about $31 billion.

Operating cash flow, or operating profit, should grow 8 percent to 10 percent and free cash flow should grow more than 20 percent in 2008, he said. Free cash flow is the money generated from the business after taxes, interest payments and capital expenditures.

The company has said it will keep capital expenditures flat in 2008. So as revenue grows at 8 percent to 10 percent, free cash flow should soar.

Angelakis, who joined Comcast in 2007 from Providence Equity Partners, a private equity firm, said his plan is to balance the competing needs of corporate growth and shareholders.

Comcast has the resources for "strategic acquisitions," Angelakis said, but would not say how large those acquistions might be. Published reports say the company could be interested in the Weather Channel. Privately held Landmark Communications Inc. has put the popular channel on the the block. Others reportedly interested include CBS Corp., Time Warner and General Electric.

Comcast officials have downplayed a potential bid for the channel and D'Arcy Rudnay, a senior vice president, would not comment.

In 2008, Comcast expects to expand its business services division. Angelakis said that as profits grow "we are managing our balance sheet and any related increases in debt" - which would allow Comcast to maintain its BAA2 rating at Moody's and BBB+ at Standard & Poor's.