Comcast CEO, Late to VoIP, Sees Growth Next Year
Comcast, which entered VoIP later than some rivals, said it expects substantial sales growth for the product next year, as it focuses on its own network rather than outsourcing, said CEO Brian Roberts. Comcast hasn’t “really yet turned on the marketing in any market,” Roberts said on a UBS conference call with investors Fri. A day before, Comcast stock fell 5.3% as investors and analysts reacted quickly to slow 3rd quarter VoIP growth. Net adds were 46,000, far fewer than many analysts had expected. Still, one analyst and an investor endorse Comcast’s VoIP plans. Others aren’t so sure.
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“I'm sorry that we have to have one or two extra quarters when people had wished we had gotten going sooner,” Roberts said: “I'm glad we built our own network, so we can do more than just phone, because that business does not have a moat around it, like video does.” Comcast expects to add as many as 250,000 phone customers this year. “When we're done, which we're saying will be next year, the entire company will have telephony with a common platform,” Roberts said: “We think that was a good decision, but it is delaying the wonderful experience that you're seeing at other companies that is helping your subscriber growth.”
During the UBS call, Roberts was peppered with questions on Comcast strategy, ranging from the phone and cable business to strategic questions on stock buybacks. Some investors said they worry about Comcast’s plan to return all free cash flow to them via stock buybacks and other actions. Roberts said he is staying the course: “We have bought a lot of stock back and I'm sure we will continue.” Commenting on outlays for newer services, including a stripped-down digital product at no extra charge except for a $70 set top, Roberts contrasted Comcast’s strategy to that of John Malone at TCI. “Our good friend John Malone held back his capital” on things such as broadband spending, Roberts said. Comcast, via its purchase of AT&T Broadband, bought TCI’s cable properties, which many industry executives had said didn’t receive enough investment.
Roberts said Comcast is focusing on cable and content, not acquisitions. “We're not seeking a large acquisition, we don’t see that strategic need,” he said: “But you can never say never on anything.” One investor who sat in on the UBS call said he supports Comcast’s phone strategy. “The VoIP strategy in and of itself is fine… assuming they execute,” Mark Asset Management Pres. Morris Mark told us after the call. The analyst who hosted the call said he backs Comcast’s strategy. “We viewed the 3rd quarter as an inflection point and look for improved operational performance in the 4th quarter and 2006,” said Aryeh Bourkoff: “The issue is much broader than what they're doing on VoIP,” said Mark. “It’s a tough business to put a moat around as it’s currently structured, and I think they would agree with that. You could say the same thing about the phone business, too.”
Comcast did draw criticism Fri. The firm isn’t using its bandwidth efficiently and should carry only digital signals to boost video capacity and broadband speeds, Fulcrum analyst Richard Greenfield wrote in a research note. He rates Comcast stock “neutral.” Instead of spending on share buybacks and acquiring cable systems, Greenfield said, Comcast should spend $5 billion on digital set tops for subscribers without them, and on installation costs. Other analysts calling Comcast’s quarterly results “disappointing” included Prudential Equity’s Katherine Styponias. “Mixed Results Highlight Glaring Lack of VoIP Bundle,” read the headline on an investor note by Sanford Bernstein analyst Craig Moffett.