Cable Operators

Having 'a Lot of Fun’ In a Banner Year

9/22/2006 8:00 PM Eastern

In December 2005, about a month before Comcast Corp.’s stock price hit a 52-week low of $25.35, chairman and CEO Brian Roberts talked in public about the challenges of pleasing stock analysts, motivating employees and doing the right thing for the business.

“Wall Street is not exactly in love with our industry right now,” Roberts said as the featured speaker at a New York City gathering to celebrate the National Association for Multi-Ethnicity in Communications’s 25th anniversary. He said Comcast officials had come away from an earnings conference call “with our head down.”

Despite “super” operating results, analysts had focused on plans to increase capital spending by $200 million to $300 million in order to meet unexpectedly strong demand from customers for digital video recorders. And Comcast’s stock went down that day.

“You have to resist the temptation,” he told interviewer Donny Deutsch. “The temptation is to cut that capital spending, that $200 million … don’t do it this quarter. Just manage to a number, not manage to what you think is right.”

Comcast wasn’t going to do that, he said: Not with so many other companies — Internet companies, phone companies, satellite companies — trying to “participate in what we’ve created.”

Instead, he said, “We’re going to go with phone, we’re going into more high-def, we’re going to two-way and interactive and mobile. And we’re going to have a lot of fun.”

Well, it took a while, but the applause Roberts got for those words from a friendly audience have resonated on Wall Street. Comcast’s stock price is up some 35% from that low ebb at the start of 2006, largely by spending the money and going with phone service successfully.

Comcast wasn’t the first cable company to do so. But for the biggest (by far) U.S. cable company to pull it off while also vigorously adding digital video customers — and hanging onto basic customers — and continuing to enhance the core video product, those are the kind of results that can lift an entire industry.

Roberts and his deal-making experts also wrapped up what they called their toughest merger ever this year by combining with Time Warner Cable to absorb Adelphia Communications Corp. While that transaction was “unbelievably hard,” in the words of longtime co-CFO Larry Smith, and had benefits to Comcast beyond just adding subscriber size, everyone expects the Comcast team to skillfully pull off big cable acquisitions. They’ve been doing it for more than 40 years.

It’s for operational excellence, for continuing to push the envelope on on-demand television as cable’s edge against satellite TV, for even creating a “Comcastic” image campaign to go with a three-service value marketing pitch and for maintaining profit margins while stealing phone customers away from the Bell incumbents that Roberts and company have been chosen by the editors of Multichannel News as Operator of the Year.

The love that they’ve helped generate for the cable industry as a result is just a big old bonus.

September