The largest U.S. cable service provider, Comcast (News - Alert) Corporation, Saturday revealed results for the quarter ended June 30, 2008.

 

Comcast posted a higher quarterly profit as it gained market share in Voice over IP (VoIP) phone and ISP customers while controlling expenses, sending shares up 6 percent. The company informed free cash flow rose 216 percent rise to $1.163 billion. This increase is mainly due to lower spending on expanding its cable systems to new communities, a development prompted by a slowdown in U.S. homebuilding.

 

"We delivered solid results in the second quarter of 2008, highlighting the strength of our businesses even in a challenging economic environment. We continue to manage the business for profitable growth, resulting in healthy revenue, operating cash flow, earning per share, and free cash flow generation,” explained Brian Roberts, chairman and CEO of Comcast Corporation.

 

He added, “Importantly, we remain very focused on delivering superior products and services to our customers, and continue to aggressively invest in projects to extend our long-term competitive advantage and to improve the customer experience.”

 

While that slowdown contributed to weaker video subscriber growth, analysts said Comcast's VoIP service was winning market share from phone competitors including AT&T (News - Alert) and Verizon Communications.

 

"Free cash flow was better than we expected and that was partly due to the fewer customer adds, so they didn't incur costs of adding new subscribers," said Tom Eagan, an analyst at Collins Stewart.

 

According to Comcast, during the second quarter the company added 278,000 high-speed Internet subscribers and 500,000 VoIP subscribers. Seven analysts polled by Reuters (News - Alert) polled had on average expected Comcast to add 327,000 new Internet subscribers and 579,000 new phone subs.

 

During a conference call, Comcast's Chief Operating Officer, Steve Burke, told analysts that the company's faster Internet access speeds are attracting phone company DSL customers since they want to watch more online video.

 

Burke added the company is poised to add more than 2 million phone subscribers by the end of the year. It currently has 5.6 million, making it the fourth-largest U.S. phone provider. Comcast currently has 24.6 million customers for all of its services.

 

Compared to its growth in IP-based services, Comcast gained 320,000 digital video subscribers during the quarter -- analysts had expected Comcast to add around 450,000 -- while it lost 138,000 basic video subscribers. Analysts on average, according to a Reuters poll, predicted that the company would lose 129,000 users.

 

Basic cable subscribers decreased by 138,000 to 24.6 million during the seasonally-weak second quarter. This compares to a 101,000 subscriber decline in the second quarter of 2007. Year to date through June 30, 2008, basic subscribers decreased 195,000.

 

Comcast added 320,000 digital cable customers in the second quarter of 2008, below the 823,000 digital cable customers added in the same period one year ago. According to the company, this deceleration was anticipated and reflects the increase in digital box deployments in the second quarter of 2007 in advance of a July 1st regulatory deadline. Year to date through June 30, 2008, Comcast added 814,000 digital cable customers.

 

Comcast reported on Wednesday that net profit in the second quarter rose to $632 million, or $0.21 per share, from $588 million, or $0.19 per share a year earlier, while revenue rose 11 percent to $8.553 billion. Wall Street had expected Comcast to post revenue of $8.574 billion and per-share profit of $0.22, according to Reuters Estimates.

 

Moreover, Comcast also spent less on purchasing new digital TV set top boxes than a year ago, when it bought a significant number of new boxes ahead of a U.S. regulatory deadline to adopt a different set-top box.

 

That deadline was a result of a government mandate to switch from analog to digital broadcasts, freeing up highly sought-after spectrum sold in a multibillion-dollar auction earlier this year.

 

Shares in Comcast rose $1.08 cents to $20.26. Shares of rival Time Warner (News - Alert) Cable also rose 4 percent, while Cablevision shares rose 4.8 percent.

 

Comcast is currently is also facing scrutiny over its network management policies for high-bandwidth ISP customers, particularly those for BitTorrent (News - Alert). The Federal Communications Commission is looking into allegations that the cable provider arbitrarily blocked certain Internet traffic without warning subscribers.

Comcast declares that the charges against it are overstated, and that the policies it imposes on traffic are there to ensure smooth network operations.