By Nat Worden
Of DOW JONES NEWSWIRES
NEW YORK -(Dow Jones)- Comcast Corp. (CMCSA), the nation's largest cable operator, posted a 22.5% increase in third-quarter earnings that beat expectations on Wall Street as the media world braces to find out whether its negotiations with General Electric Co. (GE) to take a majority stake in entertainment conglomerate NBC Universal will bear fruit.
The negotiations, which could lead to one of the most transformative media acquisitions in decades, are in the home-stretch, according to a person familiar with the situation. But they went unmentioned by Comcast in its earnings release.
The company's operating results displayed the enduring strength of the cable business amid rising competition and a stinging economic slump. Like its cable counterparts, Comcast continues to show revenue growth and solid cash flow generation, even as it loses customers overall and sees its growth in digital phone and high-speed Internet subscribers slip.
Its free cash flow--a closely-watched metric for investors--rose 19.8% to $1.112 billion, while operating cash flow gained 2.7% to $3.326 billion. The company spent $250 million on share repurchases in the quarter, having restarted its buyback program earlier this year after it was halted in the midst of Wall Street's financial crisis last fall.
Comcast reported net income of $944 million, or 33 cents a share, compared with its year-ago earnings of $771 million, or 26 cents a share. Excluding the effects of a one-time tax benefit and finance charge, Comcast earned 28 cents a share, beating the average estimate of analysts polled by Thomson Reuters of 25 cents a share.
On its top line, Comcast posted revenue up 3% to $8.802 billion, falling just shy of expectations for revenue of $8.850 billion.
The top-line performance reflected, in part, a more aggressive promotional strategy for Comcast after its second-quarter high-speed Internet subscriber additions were a disappointment. It added 361,000 high-speed Internet customers in the third quarter, down 5.5%. In the second quarter, it posted a 77% year-over-year decline.
Video subscribers declined by 132,000 in the quarter, reflecting mounting competition from telecommunications giants like Verizon Communications Inc. (VZ) and AT&T Inc. (T) offering rival broadband offerings in Comcast markets. Meanwhile, the recession, and the weakness it has brought in the housing market, is perhaps a larger drag on Comcast's subscriber performance.
It had 375,000 new voice customers in the quarter, down from 479,000 in the year-ago quarter.
Despite the slowdown, and increased promotional activity, Comcast's customers still increased their payments to the cable giant, shouldering price increases and buying new services. The company's average total revenue per video customer rose to $116.91 in the quarter, compared with $110.67 in the year-ago period. It added 1.067 million revenue-generating units in the period, down from last year's 1.131 million.
Comcast's ad revenue was down 16% for the quarter--a slight moderation in decline compared to the 20% it suffered in the second quarter.
-By Nat Worden, Dow Jones Newswires; 212-416-2472; nat.worden@dowjones.com