Comcast Executives Say NBCU Merger Benefits Have Increased
Comcast executives have become happier with their deal to buy control of NBC Universal since the it was disclosed in December, they told investors Wednesday on an earnings teleconference. The strong rebound in advertising at NBC Universal’s programming networks and Comcast’s cable systems and programming assets bode well for the union, executives said. They project ads will make up about $10 billion of the company’s annual revenue after the deal closes, up from $2.5 billion today.
Sign up for a free preview to unlock the rest of this article
Timely, relevant coverage of court proceedings and agency rulings involving tariffs, classification, valuation, origin and antidumping and countervailing duties. Each day, Trade Law Daily subscribers receive a daily headline email, in-depth PDF edition and access to all relevant documents via our trade law source document library and website.
On top of ad growth, the cheap financing NBC Universal parent General Electric and Comcast were able to secure for the deal and some recent successes at NBCU also make the acquisition more attractive, said Comcast Chief Operating Officer Stephen Burke. “In a number of their businesses they've had a number of wins. That stretches from NBC to the cable channels,” he said. “The entry into the animation business with Despicable Me is a big deal, in our opinion.” With the deal’s regulatory review well under way, Comcast executive said they remain hopeful it will conclude and the transaction can be completed before the end of the year. Everything Comcast has heard from the FCC and Justice Department indicates both agencies are still working to wrap up review on their original schedule and in time for the deal to close in 2010, said a Comcast executive.
A negotiated deal between industry groups and government could still be worked out to resolve the FCC’s authority over the Internet, Comcast Chairman Brian Roberts said. “We feel pretty pleased that there’s a constructive dialog around this with the FCC and with a number of stakeholders.” The commission needs reasonable rules to be able to implement its National Broadband Plan, a document which Comcast supports many elements of, he said. As FCC Chairman Julius Genachowski “talks about a ’third way’ proposal, that’s one possibility,” Roberts said. “It seems like the extreme scenarios are off the table from our perspective."
Comcast lost 265,000 video customer during the quarter, but added 118,000 broadband and 230,000 phone accounts. The dropoff in video subscribers came as many customers who signed up ahead of last year’s DTV transition on a 12-month promotionally priced package left, said Burke. Comcast estimated it picked up about 100,000 subscribers as a result of the DTV transition, he said. “These are price-sensitive high-churn customers and we elected not to chase them.” Competition from direct broadcast satellite operators and economy may have also played a role in those results, executives said. Q2 is usually the company’s weakest quarter as college-age customers move away from their schools for the summer. Those subscriber results probably mean Dish Network and/or DirecTV picked up more customers during the quarter, analysts said.
Comcast’s revenue per subscriber and overall sales increased although it lost subscribers. A 23 percent boost in ad sales Q2 from a year earlier helped lift total company revenue 6.1 percent to $9.5 billion. That mix of higher sales and fewer subscribers means the customers Comcast is adding are more profitable, Miller Tabak analyst David Joyce wrote investors.
Comcast has taken 60 percent of its footprint all-digital and is working on another 20 percent, executives said. In 80 percent of its footprint it’s introduced DOCSIS 3.0 technology and is “substantively complete” with that process, Chief Financial Officer Michael Angelakis said.
Netflix has done a great job with its streaming online video product, Roberts said. “They offer a nice product and all we can do is try to make our products better.” Though Comcast has more variety on its VOD platform, Netflix has a more elegant user interface, he said. “One of the things Netflix does beautifully … is give you a great way to search and find recommendations,” Roberts said. “That’s not so easily done on our electronic programming guide today. We are improving and we will continue to improve.”