Comcast Sure on Rebuilding AT&T Ops3/02/2003 07:00:00 PM Eastern
Three months into their takeover of AT&T's cable systems, Comcast executives are confident of their ability to get the operations into the shape they want.
The upbeat forecast came as Comcast posted earnings for the fourth quarter and projections for this year.
The $57.4 billion takeover of AT&T Broadband closed just six weeks before the end of 2002, so Comcast's fourth-quarter report doesn't show much evidence of the Comcast touch on the AT&T systems. But the MSO's executives stressed that their turnaround plan is nothing fancy, focusing more on improving day-to-day operations and less on some promised corporate "synergy."
"We don't think it's acceptable to lose a hundred thousand subscribers a quarter," said Comcast Cable President Steve Burke. "We don't think it's acceptable to leave 15 margin points [of cash flow] on the table." AT&T Broadband's already woeful 25% cash-flow margins fell to 15% for the quarter, although the basic-customer losses dropped to 50,000 subscribers.
Comcast expects subscriber growth to be flat this year—a big improvement over AT&T Broadband's 500,000-subscriber drop in 2002. Salomon Smith Barney media analyst Niraj Gupta had been expecting a 170,000-subscriber loss. Revenues should increase 8%-9%, to $17.5 billion.
Comcast executives no longer blame high costs of AT&T's cable phone operation as heavily for the unit's financial problems. "The real problem with AT&T Broadband's performance, we believe, has not been the telephone business," Burke said, "but has been a degradation in the profitability and the growth of the video business."
Also, they say, it won't take as much time—or quite as much money—to complete the rebuild of AT&T Broadband's systems. About 93% should be upgraded to 750 MHz or more by year-end, with the rest finished in 2004.
Moreover, because many contractors are idled by the collapse of the telecom business and cutbacks by other cable operators, Comcast has been able to negotiate deals shaving its capital-spending budget this year. The company had expected to spend up to $4.5 billion. Now CEO Brian Roberts expects to spend a little over $4 billion.
"Not only will it be further along, it will cost less to get there," he said. "We are quite confident that we can do this."