Michael Angelakis, Comcast CFO, sits down with Citigroup analyst Jason Bazinet at the bank’s annual media and telecom conference. Key points:
- Recession threat is real. Bad customer debt increased late last year, and churn — the percentage of customers who leave the service each month — increased. Regardless, Comcast thinks there’s room for growth this year.
- Video on demand will play a big role getting more HD content into the cable network and competing with Internet video products.
- Comcast has no wireless strategy — yet. They have plenty of options, including spectrum purchased during the FCC’s last auction, and a JV with Sprint Nextel. But so far, they haven’t figured out what kind of services they would offer.
10:12 In second half of ’07… bad debts increased, pickup in churn, put pressure on net adds.
10:14 40% of digital customers are HD customers. Continuing to roll out HD linear, on-demand. Hope is to have 3,000 HD movies on VoD. Last year’s focus was triple play… satellite focusing on HD only, so might have upper hand in marketing. Comcast will do a better job at marketing.
10:18 Network upgrades: where are you? 1 GHz? Switched digital? How evolving? 1 GHz: Not upgrading across the board. Pretty comfortable where we are. Some new equipment 1 GHz, but don’t think it’s necessary company wide. Switched digital tests in NJ, Denver… very successful. TWC also testing, successful rolling out. Taking a system-by-system approach to transition to new technologies.
10:20 We think we have options of how to free up excess capacity, whether VoD, other new tech. Don’t have to strip analogue out across the board. Any pressure to upgrade Comcast networks where VZ FiOS is? No.
10:22 Street is valuing cable cos differently — not really growth stocks anymore. Does Street have it wrong? Or entering a period where soberly say that cable is no longer a growth stock, focus on free cash, buybacks, dividends? Still lots of headroom on broadband and VoIP. “I think we have a lot of growth left.” Plus business service opportunities.
10:24 Focused on revenue, OCS, and free cash flow growth. Capex clearly a key component. If capex is invested to generate a return, I’m optimistic.
10:25 Comcast has focused too much on video in past. Now pushing bundles w/ voice and broadband Internet.
10:27 Tangible examples of how you’re correcting HD message vs. satellite? Marketing, advertising, triple-play promotion w/ free HD box. Don’t think it’s quantity, but quality, of HD channels that matters. Too much focus on number of channels. How about both? Want to focus on retail, too — get salespeople to push Comcast and not just satellite.
10:31 Dividends haven’t been focus in past but not out of the question.
10:31 Relationship with Sprint? Role of wireless in service bundle? Pivot JV has not really evolved into a good product. Hopeful that new management at Sprint will turn things around. Obviously they have been under pressure for the past year, and now management change. Hope to set up some partnerships, especially around 3G, that make sense. On wireless broadband: not participating in 700 MHz auction. Major investment in last FCC auction. Trying to figure out: what is the product? How does wireless fit in? What is business plan/financial case around that? Haven’t resolved any of these questions. Don’t feel immediate pressure of needing a wireless product.
10:34 How long until roll out TiVo product nationwide? Consumers responsive to $3 upcharge? Still in early stages in New England. Think product is very good. In New England have launched in certain parts. Pretty sophisticated effort — mostly a software download. Don’t have a date for nationwide launch; continuing to roll it out. People who have it are pretty satisfied, but that’s all I can say now.
10:36 In Q1 we’ll give more information about discretionary capex growth. Happy to provide transparency. I think maintenance capex is going to be recurring. Discretionary capex will be non-recurring: some will have interesting RoI, some won’t. Will do our best to categorize capex categories.
10:38 Balance sheet: Goal is to stay between 2.5x – 3x leverage.
10:40 Typical cable bill now $100-$150/month. In view of how huge bills are now, how recession resistant do you really think you’re going to be? Great question — don’t think anyone really has the answer to that. Offering lower-price, lower-speed broadband service so people don’t leave Comcast for DSL. Saw some softness in Q4, think we will grow also in ’08. Don’t know actual impact of recession, but even in some tough markets where there are foreclosures, clearly seen impact but business is still growing. AT&T feeling softness too. We’ll see how deep this recession is. But comfortable that will be able to grow in ’08.
10:45 Session ends early.
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