Comcast 1Q: Rate Hikes Affect Video Sub Losses, Net Income Rises

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Cable was strong for Comcast (despite 1Q video losses falling below expectations), but NBC continues to be a drag. Still, even with ratings softness at NBC, there is hope. “After the recent buyout of GE, we see NBCU poised for potentially sizable long-term upside on traditional and nascent streams,” said S&P's Tuna Amobi. Macquarie's Amy Yong wrote that she expects to see some improvement at NBC due to a stronger slate of programs in 2Q. “We're making some progress, but we do need some more shows,” NBCU chief Steve Burke said during Wed's earnings call. “I happen to be in L.A. right now. We're going through pilots. And we're putting a tremendous amount of focus and concentration on building on the success we've had so far and developing shows that will continue that success next year.” NBC generated an operating cash flow loss of $35mln in the Q, compared to a loss of $14mln a year ago. Cable networks generated revenue of $2.2bln, an increase of 4.6%. For the company as a whole, revenue was up 2.9% to $15.3bln and net income rose 17% to $1.4bln. On the cable side, Comcast lost 60K video subs vs 37K in 1Q12 as it increased rates across most of its footprint. It also changed the way it accounts for MDU customers, which affected the numbers. Video revenue, however, grew 3.7%, a 4-year high. Wells Fargo Securities told clients it expects this will probably be the only Q with a YOY decline in the number of sub losses. “I think one of the things that was notable is that most of our losses were single-play only customers, and we continue to drive focus on high value subs, and you're seeing that in triple-play results,” Comcast Cable pres Neil Smit said. Wells Fargo noted that Comcast seems to be experiencing the opposite of Time Warner Cable, which has said that triple-play promos resulted in higher churn and less profitable subs. “We are still trying to decipher the difference between CMCSA and TWC in terms of the triple-play,” the analysts wrote in a note to clients. HSD had 433K new customers, while voice grew by 211K, a 29% increase over last year. On new products, Smit said a “relatively high” percentage of customers who have never had a security service are taking Comcast's home monitoring product. “And 40% of those are new to Comcast, and 70% of those are taking triple play or quad play, so that's an encouraging sign,” he said. The X1 platform, currently in approx 30% of its footprint, should hit 50% by the end of 2Q. The next-gen version of X1 will be on display at the Cable Show next month in DC.

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