Comcast seeks reputation change with Xfinity brand

Tue Feb 9, 2010 1:07pm EST

* Hopes to improve customer perception with new brand

* Strong competition means customer service is key

* Customer satisfaction could boost Comcast value - Citi

By Yinka Adegoke

NEW YORK, Feb 8 (Reuters) - If you search for "Comcast" on YouTube, the top clip is one of a cable technician fast asleep on a customer's sofa while waiting on the phone for a reply from the cable company's head office.

Such clips, plus numerous blog posts and Twitter messages that berate Comcast's customer service, are the reasons behind a major marketing campaign to rebrand the No. 1 U.S. cable TV service under a new name, Xfinity.

Comcast, which has 23.8 million subscribers, lost more than 600,000 subscribers in 2009, as competition intensified from the likes of DirecTV Group (DTV.O), DISH Network Corp (DISH.O), Verizon Communications Inc (VZ.N) and AT&T Inc (T.N).

Comcast CEO Brian Roberts, who has placed customer service at the top of his list of priorities for 2010, has said the Xfinity brand will initially launch in 11 markets with Comcast's advanced digital TV and super-fast Internet service.

"The adoption rate and utility of our products has been quite high," said David Watson, Comcast Cable's head of operations. "But the core issue has been customers are not necessarily thrilled with the relationship and the Comcast brand."

The importance of customer service cannot be underestimated, analysts said, pointing to a strong correlation between customer satisfaction and subscriber growth.

Citigroup analyst Jason Bazinet estimated that a 10-point improvement in the American Customer Satisfaction Index (ASCI) would translate to an increase of 500,000 basic video subscribers for Comcast.

That could in turn boost the company's enterprise value -- currently at $72 billion -- by $1 billion, assuming $2,000 per subscriber, Bazinet wrote in a report. Enterprise value is market capitalization plus debt, minority interest and preferred shares, but excludes cash.

"With more telco fiber on the way, wireless networks with increasing capabilities and the threat of emerging business models -- from firms like Apple Inc (AAPL.O) -- we believe a renewed focus on customer satisfaction would pay ample dividends for shareholders," Bazinet said.

But does a new brand guarantee a change in the way customers perceive Comcast's service?

Bazinet points to New York-based Cablevision Systems Corp (CVC.N), which successfully introduced its Optimum brand to include all its services in 2003. Cablevision "dramatically improved satisfaction over the last five years," he said.

Verizon's FiOS TV also now has nearly 3 million customers after launching less than three years ago.

Even Time Warner Cable Inc (TWC.N), which separated from Time Warner Inc (TWX.N) last March, is having internal discussions about a wholesale name change or new brand for its cable services, according to a person familiar with the talks.

But Allen Adamson, managing director of Landor Associates and author of "BrandSimple," said one risk is that companies confuse customers with multiple names. Comcast's corporate name remains unchanged after the Xfinity launch.

"Branding is hard in this category because of the weakest link, which is customer service," Adamson said.

The challenge will be to ensure the Xfinity brand doesn't become just another cable TV name with all the negative baggage that might entail.

Chris Marangi, a portfolio manager at Gabelli & Co, which owns shares in Comcast and other pay-TV companies, agrees that customer service is a key metric in a competitive market.

"We do look at it. Over a long period of time, customer satisfaction should correlate to subscriber stickiness and pricing," he said.

"Xfinity underscores the fact that Comcast is not just a video packaging company anymore but there have to be capabilities that back up the claim and the branding." (Reporting by Yinka Adegoke; Editing by Derek Caney)

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