UPDATE 2-Comcast adds video customers; NBC Universal unit improves

Tue Jan 28, 2014 12:51pm EST

By Liana B. Baker

Jan 28 (Reuters) - Comcast Corp on Tuesday reported that it added more video subscribers than expected in the fourth quarter and beat cash flow estimates at its NBC Universal media unit, sending shares up more than 1 percent.

Comcast, the largest U.S. cable provider, said it added cable video subscribers for the first time in more than six years, helping to more than offset a slight miss in quarterly profit. The 43,000 new video subscribers topped estimates of a gain of 1,600 customers, according to StreetAccount. In the third quarter, it lost 129,000 video subscribers.

"Comcast's return to positive video subscriber growth, even if it is only for a single quarter, is an unmistakable sign that their days of losing share to satellite are almost over," said MoffettNathanson Research analyst Craig Moffett, referring to rivals DirecTV and Dish Network Corp.

Executives said its cloud-based "X1" video operating system as well as an increase in subscribers buying "triple-play" packages of Internet, cable and phone helped retain customers in the quarter.

Comcast increased its dividend by 15 percent to 90 cents per share annually, authorized a new $7.5 billion stock repurchase program and said it would buy back $3 billion in stock this year.

NBC Universal's operating cash flow rose 14.3 percent to $1.34 billion, topping analysts' estimates of $1.21 billion.

"The reason why the stock is up is that NBCU is doing much better than what people are expecting, in terms of advertising, broadcast and at its cable networks," Macquarie analyst Amy Yong said.

While the quarterly subscriber numbers were a highlight, Comcast Cable Chief Executive Officer Neil Smit said it would be a while before the company added video customers on a full-year basis.

The company said programming expenses would rise 9 percent to 10 percent in 2014, compared with a year ago as it grappled with higher fees charged by broadcasters and sports networks. Comcast will offset the costs by raising cable prices, Comcast Chief Financial Officer Michael Angelakis said.

The company said capital expenditures will increase to 14 percent of cable revenue as it invests more in the "X1" system and expands services like Internet and phone to businesses.

Smit, the cable executive, confirmed that Comcast had partnered with Cox, the third-largest cable operator, to license its X1 platform and was working with Cox to find ways to tap the product. Talks between the two was first reported by Reuters earlier Tuesday.

ADDS 397,000 INTERNET CUSTOMERS

The company is considering boosting its cable subscriber base on the U.S. East Coast and has been in talks with Charter Communications Inc to carve up Time Warner Cable's cable systems, a source has told Reuters.

But executives avoided any mention of its cable consolidation strategy on Tuesday.

Free cash flow fell 22 percent to $1.4 billion in the quarter, compared with a year ago, due to higher capital expenditures and working capital.

Comcast added 397,000 high-speed Internet customers, topping estimates of a gain of 350,000 customers.

Comcast recorded fourth-quarter net income of $1.91 billion, or 72 cents a share, compared with $1.52 billion, or 56 cents per share, a year ago.

Adjusted for a tax gain, the company's earnings per share were 66 cents per share, which missed analysts' estimates by 2 cents.

Revenue rose 6 percent to $16.92 billion, above estimates of $16.625 billion, according to Thomson Reuters I/B/E/S.

Shares advanced 1.2 percent to $53.13.

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