Cable seeks Street's backing for AT&T offer
NEW YORK — Comcast posted sturdy quarterly numbers Wednesday as execs at the Philadelphia cabler urged Wall Street to back their offer for AT&T Broadband.
“We have proposed a transaction that has the potential to be great for both sets of shareholders, and we hope to begin a dialogue promptly with AT&T,” Comcast prexy Brian Roberts said during a conference call.
Roberts insisted the unsolicited proposal, which Comcast made public in July and AT&T promptly rejected, was “fair and full.” He has no plans to raise it unless another bidder emerges for the AT&T unit, which is the nation’s biggest cable operator. AOL Time Warner and Walt Disney are said to be interested.
However, “It’s been three and a half weeks and there’s been pretty much radio silence,” Roberts noted in an TV interview.
He said a recent uptick in AT&T stock is proof the market appreciates the offer. (It more likely appreciated the fact that Comcast put AT&T in play.)
The bid was worth $58 billion at the time, including $13 billion in debt, but has since eroded in value along with Comcast’s share price. Roberts noted that 80% of AT&T’s approximately 800 institutional shareholders also hold Comcast, which “shows a remarkable acceptance of our company and our voting structure.”
AT&T had taken issue with the fact that Comcast and its shareholders would hold a minority of the equity but have voting control of a combined entity.
Boost from numbers
Roberts said Comcast’s solid financial report, announced after the market closed Wednesday, should reassure investors that it’s “got the management and the focus” to digest a purchase as big as AT&T Broadband.
Revenue for the second quarter, ended in June, rose a hefty 20% to $2.3 billion, the bulk coming from Comcast’s sprawling cable systems.
Operating losses widened to $133 million from $32 million and net profit fell to $35 million from $180 million. The company is taking on red ink from business telephony initiatives and from QVC nets in Germany and in Japan, which launched during the quarter. And Comcast, like most of its rivals, has been investing heavily to upgrade its cable lines for new services. It said 95% of its systems will be rebuilt by year’s end.
Operating cash flow, another key metric, was up 16% to $700 million.
Execs anticipate full-year revenue will be up 10%-12%.
The cable division saw pro forma revenue rise 9.7% to nearly $1.3 billion and operating cash flow grow 13% to $497 million.
Subs drive services
As of June 30, Comcast had 8.3 million subscribers, including some 1.8 million digital subs (up 200,900 from the year before). Execs expect 2.2 million digital subs and 950,000 high-speed data subs by year’s end. An AT&T buy would inflate Comcast’s subscriber count to 22 million, which Roberts said would make it that much easier and more cost-effective to roll out new services.
Features such as video-on-demand are key as cable seeks to dominate satellite. Heartened by Universal’s recent pact with InDemand, Comcast execs believe “more studios are waiting in the wings and more product will become available in the future.”
At giant electronic retailer QVC, revenue rose 14% to $876 million and operating cash flow grew 19% to $160 million. In a new marketing push, execs said Comcast plans to open the first QVC store in the Mall of America in Minnesota.
Content assets, including E! Networks, the Golf Channel, Comcast Spectator and Home Team Sports, grew revenue by 15% and operating cash flow by 21%. While the numbers aren’t broken out, execs said E!’s revenue was up in the mid to high teens and cash flow up in the mid-20% range due to subscriber growth and a carryover from last year’s strong upfront. E! had 70 million subs by the end of June.