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Comcast quarterly profit down on NBC Universal deal costs

Excluding costs from the pending takeover of NBC Universal, cable giant Comcast's earnings in the second quarter beat analysts' estimates.

July 28, 2010|Bloomberg News

Comcast Corp., the largest U.S. cable company, posted second-quarter profit and sales that beat analysts' estimates as more customers elected premium services such as digital video recorders and high-speed Internet.

Profit, excluding costs related to the company's pending takeover of NBC Universal Inc., was 33 cents a share, on sales of $9.53 billion, Comcast said Wednesday. That topped the 32-cent average of estimates compiled by Bloomberg. Analysts predicted the cable operator's sales would be $9.28 billion.

Through promotions and system upgrades, Chief Executive Brian Roberts has signed up bandwidth-hungry customers willing to pay more for the most advanced products available, such as high-speed Internet and digital video recorders. The company added 118,000 new broadband subscribers in the quarter and boosted its average monthly revenue per customer by 8% to $127.78.

"The share shift from DSL to cable is accelerating as people need and want more bandwidth," said Todd Mitchell, an analyst at Kaufman Bros. in New York. "Cable just offers a superior product."

Verizon Communications Inc. and AT&T Inc. reported declines in DSL, or digital subscriber line, customers in the second quarter, which bodes well for cable's competitive edge and growth prospects, Mitchell said. AT&T lost 348,000 DSL subscribers in the second quarter, while Verizon shed 168,000.

Comcast's net income fell 8.6% to $884 million, or 31 cents a share, from $967 million, or 33 cents, a year earlier. The cable operator's results were bolstered by a $137-million tax benefit in the year-earlier period.

Comcast expects to complete the regulatory review for its proposed majority takeover of General Electric Co.'s NBC Universal this year, said Roberts in the company's conference call. The $28-billion transaction is being evaluated by the Justice Department and Federal Communications Commission.

The cable operator is more optimistic about the deal's prospects than when it was first announced in December, said Stephen Burke, Comcast's chief operating officer. Comcast's cable segment posted advertising revenue growth of 23% in the quarter. Comcast and NBC Universal will have about $10 billion annually in advertising sales combined, Burke said.

"Advertising has got to be the biggest headline," Burke said. "We signed the deal when advertising was going backwards. Now we're seeing it going up, and that's a big deal."

In addition, Comcast has been able to secure financing at "very attractive rates" for the deal, and NBC Universal has had success on several projects, including the movie "Despicable Me," Burke said.

Comcast shares rose 23 cents to $19.56.

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