Comcast Begins Post-Merger Era With Stellar Earnings Report

BY STACI D. KRAMER

If analysts reviewed earnings reports the way critics rate movies, Comcast Corp. could well have received four stars for its first post-merger performance.

Comcast wowed the investment audience with a fourth-quarter 2002 earnings release and 2003 guidance that said the company had stemmed the loss of AT&T Broadband basic video subscribers, would beat its own margin expectations and would come in under estimate on upgrade costs and scheduling.

?We've got a couple months under our belt, and we think this is off to a very fast start,? Comcast CEO Brian Roberts told analysts during a Feb. 27 conference call.

?There will be no more loss of basic subscribers,? Roberts pledged, saying the company would end 2003 with the 21.3 million subscribers it had when the year began. He called the loss of 481,300 subscribers at AT&T properties in 2002 an alarming trend that had to be dealt with.

In the fourth quarter, historical Comcast gained 40,600 subscribers while the AT&T properties lost 49,700 for a net loss of 9,100. That was far fewer than might have been expected given AT&T's six-digit losses in the previous three quarters. In the last three months, Comcast lost 8,000 subscribers compared to a loss of 170,000 in the same period a year ago.

Comcast Cable president Steve Burke called the subscriber turnaround ?perhaps our biggest accomplishment.? He predicts subscriber growth in March and for the first quarter.

UBS Warburg analyst Aryeh Bourkoff, who recently initiated coverage of Comcast, said the company exceeded his expectations. ?I've got a lot of confidence that the integration is succeeding ahead of schedule,? he added.

Merrill Lynch analyst Jessica Reif Cohen said in a note that the newly merged company had ?a stellar first 100 days? and that the next 1,000 could be even better.

Comcast ended 2002 with 1.4 million telephone subscribers and a penetration rate of 16.5%. Burke said Comcast will maintain the current footprint but essentially is putting telephony on hold for the next 18 months or so. In the interim, it will continue to explore VoIP as an option.

On the high-speed data side, said Burke, ?I think we're quite early in the product life cycle and the best days are ahead of us.? Comcast ended 2002 with 3.6 million high-speed subscribers and predicts it will finish 2003 with 5 million.

Comcast expects to have 90% of the company upgraded to 550-MHz two-way or better by the end of the year at a substantially lower cost than expected. That, combined with dropping equipment costs and fewer digital installations, will lower capital expenditures to $4 billion from an estimate as high as $4.5 billion.

Another priority is achieving the efficiencies Comcast promised when it pitched the merger. The MSO said its job cuts at the combined company through January totaled 5,000-3,300 field positions in addition to the previously announced 1,700 layoffs at AT&T headquarters in Denver. The projected savings in 2003 is $500 million.

Comcast's stock hit $29.22 Friday, the first time since last May that it closed over $29.