PHILADELPHIA – Consumers signing up for digital cable TV and high-speed Internet services led to a 12 percent increase in first-quarter profit for Comcast Corp. The company also said advertising on its cable channels rebounded in the quarter, indicating that an economic upturn is taking hold.
The nation's largest cable TV provider still sounded cautious notes Wednesday, as the jobless rate remains high and the housing market still is under duress. Cable companies often consider the construction of new homes to be prime opportunities to sign up new customers as they move.
"While it's not clear whether we're entirely out of the woods on the economy, we are cautiously optimistic, and are clearly executing better in this environment and against the competition," CEO Brian Roberts said in a conference call with analysts.
The quarter also showed how competition in the TV business is taking a toll. Comcast's overall video revenue fell, in part because the company wasn't able to raise cable TV rates as much as it had a year earlier.
Comcast earned $866 million, or 31 cents per share, from January through March. That compares with $772 million, or 27 cents per share, in the same quarter in the prior year.
Revenue rose 3.8 percent to $9.2 billion from $8.9 billion in the first quarter of 2009.
The results beat the forecasts of analysts polled by Thomson Reuters, who on average expected Comcast to earn 30 cents per share on revenue of $9.15 billion.
Free cash flow — a key metric for cable TV companies that manage high amounts of debt — rose 38 percent to $1.89 billion as Comcast spent 20 percent less on capital expenditures.
Advertising revenue rebounded in the quarter, rising 23.5 percent to $360 million. Comcast said the recovery came across the board, from different types of advertisers, including automotive companies. Comcast sells national, local and regional ads on its cable channels such as E! Entertainment Television, Style Network and the Golf Channel, as well as on other cable networks.
But Comcast's core video business continues to be under pressure. The company lost 82,000 video customers, a slight increase from the first quarter of 2009, although that was better than what some analysts expected. Cable, with two-thirds of the pay-TV market, has been steadily losing video customers to satellite TV and phone companies that offer video.
Accordingly, video revenue fell nearly 2 percent to $4.84 billion. Contributing to the decline: a lower increase in cable TV rates. Comcast was able to raise rates by an average of 2.4 percent compared to more than 5 percent in the same quarter last year.
However, more of the video customers who remain are signing up for digital cable TV packages, which are pricier for them and more profitable for Comcast. It signed up 427,000 households to digital service, a 48 percent increase from a year ago.
The company added 399,000 high-speed Internet customers, up 21 percent. Cable companies are gaining share from phone companies in the broadband market, said Pivotal Research Group analyst Jeffrey Wlodarczak.
But growth in the number of phone customers slowed. Comcast added 275,000 new phone subscribers in the quarter compared with 298,000 in the same period of the prior year.
Shares of Comcast, based in Philadelphia, rose 29 cents, 1.6 percent to $18.75 in morning trading.
The company, which plans to acquire a controlling stake in NBC Universal from General Electric Co., said it still expects the regulatory review of the deal to end this year.