Approaching the first anniversary of its acquisition of AT&T Broadband's cable systems, Comcast again surprised the market with how quickly it is turning the properties around. Third-quarter operating cash flow jumped 35% to $1.6 billion, largely thanks to the revival of the AT&T systems. Of course, Comcast has the benefit of "easy comps," comparing itself against AT&T's woeful management. But the revival is much stronger, much sooner than even optimists expected.
The AT&T properties' cash-flow margins have jumped from a dismal 26.4% last year to 33%. Margins on Comcast's existing systems improved from 41.7% to 43.2%.
Subscriber growth continues at the old AT&T systems. During the first nine months of 2002, they had lost 434,000 subscribers; this year, they have added 101,000.
Not that every number was sparkling. Revenue growth at Comcast's cable systems was a middling 8%, to $4.3 billion. CFO John Alchin cited the telephone business for that: To juice telephone-unit growth, AT&T had discounted heavily, adding unprofitable customers. And the old Comcast systems are losing basic customers, down about 30,000 in the third quarter.
Neither Comcast nor Cox Communications saw dramatic effects from the DSL price war telcos are waging against cable. Comcast added 473,000 data homes, vs. 315,000 added in the second quarter, raising penetration to 14.5% of homes passed.
Cox added 169,000 data units during the quarter, up from 157,000. Overall, Cox increased revenues by a strong 15% to $1.5 billion and cash flow a fat 20% to $543 million.
Insight Communications continues to struggle. The 1 million-subscriber MSO increased revenues a strong 11% to $228.4 million in the third quarter, but expenses rose faster, keeping cash-flow growth to 6%.
"We know this wasn't the growth rate you were expecting, nor was it the growth rate we had planned," new COO Dinni Jain told investors, according to an earnings-call transcript from StreetEvents.com. "Our plan called for 14% growth, which would've taken us to $105.7 million, a difference of just over $7 million." Jain blamed the shortfall on basic-subscriber losses and telephone-business problems.