Comcast earmarks $4.5 bil for upgrade
Broadband cable to be fast-tracked for upgrade
Presenting Tuesday at the Credit Suisse First Boston Media Week conference in New York, Comcast exec VP-treasurer John Alchin laid out a fast-track campaign to upgrade some 70,000 miles of old AT&T Broadband cable in the next two years, costing an estimated $2.5 billion. In total, the company has earmarked capital expenditures of $4.2 billion to $4.5 billion through 2004 to get the whole cable operation to cash-flow breakeven, Alchin said.
Comcast said the full-court press is essential to improve AT&T's system margins by creating vital new digital and high-speed data revenue streams. Alchin noted AT&T systems lost 521,000 subscribers in the year ended Sept. 30, and its operating margin was just under 24%, compared with Comcast's 41%.
Comcast defied Wall Street concerns that the company can't manage the heavy capital requirements, and insisted its balance sheet was solid. Though currently saddled with some $30.5 billion in debt from the acquisition, Alchin said at least $5 billion would be paid down in the near future thanks to cash-flow growth and settlements from its Time Warner Entertainment exit.
Marketing VP Dave Watson said Comcast will be pushing video-on-demand heavily in its systems as a way to lure the 50% of its customers who don't take premium services.
The new company, with a footprint of 38 million homes passed, will officially start rebranding itself "Comcast" in a series of glossy TV ad campaigns in February.
Cable colleague Cablevision, also presenting at CSFB, said it is counting on faster cash-flow growth from its telecommunications and digital cable services in 2003 to boost its prospects. The company promised improved digital penetration and much growth ahead for the Independent Film Channel and American Movie Classics.
Cablevision has been slower than most cablers to upgrade to digital, but claims its spending requirements are declining as its rollout nears completion.
Exploring DBS options
Cablevision vice chairman Bill Bell said the recent sale of Bravo to NBC netted the company $328 million, which will be used to pay down bank debt. Bell maintained Cablevision's usual tight-lipped line on the subject of the company's planned Rainbow DBS project, saying only that the company would spend $75 million next year to launch the satellite in order to comply with the FCC license requirements.
"We're still exploring all of our options with DBS, and the announcement today (on the formal end of EchoStar's attempt's to buy DirecTV) doesn't change that." EchoStar had offered to sell Cablevision key slots in order to facilitate approval of its now-defunct merger bid.
Nor would Bell disclose the status of Fox Entertainment's pending put option on the two companies' jointly owned regional sports networks. Fox has the right to force Cablevision to buy out its stake or else jointly float the venture.
Rainbow Media president Josh Sapan said he was optimistic about continued digital penetration growth for both IFC and Women's Entertainment channels, while insisting AMC, which is being repositioned to attract a younger audience, could significantly increase its share of advertising revenue. IFC currently has 25 million subscribers and is rolling out an IFC-on-Demand VOD option on digital systems.
Tom Rutledge, president of the New York metro area, conceded Cablevision had lost 40,000 basic subscribers in 2002, largely due to its refusal to carry the Yankees Entertainment & Sports Network.
Third-ranked cabler Charter Communications, meanwhile, announced "significant" job cuts as the 6.7 million-subscriber system undergoes a top-to-bottom restructuring. CEO Carl Vogel would not disclose the number of layoffs. Charter is under investigation by the Dept. of Justice for its accounting practices.
