Fool on the Street: Comcast's Triple Play

At the Merrill Lynch Media & Entertainment conference a couple of weeks ago, executives from Comcast (Nasdaq: CMCSA  ) spoke to a gathering of analysts on its future plans for "triple play" success. To give you the inside scoop on what these analysts know that individual investors don't, I listened in and wrote up my thoughts.

The opening act
Co-CFO John Alchin warmed up the crowd by talking about the company's success with first launching new channels in video on demand (VOD), then creating a traditional, scheduled station out of the material people actually want to see. One example is the PBS Kids Sprout channel, and there's a VOD-only Horror Channel scheduled for debut around this Halloween.

John went on to highlight the newfound breadth of partnerships with set-top box manufacturers like Motorola (NYSE: MOT  ) , TiVo (Nasdaq: TIVO  ) , and Samsung. Going from two suppliers to five gave Comcast a better position in price negotiations, reducing hardware costs by 15% year over year while simultaneously giving customers boxes with more functionality. Everybody wins, it seems.

Then there's the "triple play" strategy. In the cable industry, companies like to track their customers as revenue-generating units (RGUs), meaning the sum of all analog-cable, digital-cable, and broadband-access customers. Digital phone subscribers have started to creep into these figures lately, too. A customer with high-speed Internet service and digital cable counts as two RGUs, and a full-blown triple-play customer counts threefold.

Play it again, Sam
As a result of Comcast's focus on tripartite services, RGU net additions have skyrocketed this year. In each of the last three years, the company added 2.6 million new RGUs, but it is on pace to exceed its original guidance of 3.5 million this year, with the new target set at roughly 4.2 million additions. That sound you hear is the ringing of cash registers.

Alchin rounded off his presentation with a look at the ways Comcast is returning capital to shareholders these days. This year alone, the company has bought back $1.4 billion worth of outstanding stock shares, invested $2.3 billion in forward-looking capital expense projects, and still kept free cash flow growing. That still leaves a shareholder-friendly $3.9 billion of the company's share repurchase program to be fulfilled.

Cable and phone companies often get a bad rap for being less than customer-friendly, and looking at Alchin's presentation, it's easy to see why. Comcast can benefit substantially from upselling customers on features they didn't necessarily want, and that's become an essential part of the company's overall strategy going forward. On the other hand, shareholders should be happy to see substantial stock buybacks, healthy revenue growth, and cash flow growth on the back of these selling tactics, and Comcast says that this is just the beginning of the triple-play success story -- we ain't seen nothing yet.

That wraps up the first part of our report from this presentation with Comcast, but stay on the lookout for more "Fool on the Street" reports that bring you juicy information that only the analysts have heard. Up next: Comcast marketing VP David Juliano.

Further Foolishness:

TiVo is aMotley Fool Stock Advisorrecommendation. To see how the plucky upstart can overthrow our TV-watching habits, try a 30-day free trial to our flagship service.

Fool contributorAnders Bylundholds no position in any of the companies discussed here, though he counts as two RGUs for his cable provider. You can check outAnders' holdingsif you like. Foolishdisclosurerules hear all and see all.

Read/Post Comments (0) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 508674, ~/Articles/ArticleHandler.aspx, 5/26/2016 4:44:32 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 17,828.29 -23.22 -0.13%
S&P 500 2,090.10 -0.44 -0.02%
NASD 4,901.77 6.88 0.14%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

5/26/2016 4:00 PM
CMCSA $62.29 Down -0.31 -0.50%
Comcast Corp CAPS Rating: ***
MSI $69.40 Up +0.05 +0.07%
Motorola Solutions… CAPS Rating: ****
TIVO $9.96 Up +0.01 +0.10%
TiVo CAPS Rating: **
VZ $50.16 Up +0.31 +0.62%
Verizon Communicat… CAPS Rating: ****