Business Services A Bright Spot In Comcast Financials

Comcast's Business Services division grew more than 20 percent last quarter and has plenty of room to expand, said executives last week as the company reported second-quarter financial results.

The Business Services division, which includes the telecommunications giant's channel business, hit $1.16 billion, up 20.4 percent compared with the same quarter a year ago. Comcast's overall revenue for the quarter, which grew more than 11 percent, to $18.74 billion, beat analysts' estimates of $18.14 billion, according to Thomson Reuters.

Business Services revenue has been the second-largest contributor to cable revenue growth for 17 of the past 18 quarters, the company said.

[Related: Partners: Comcast Missing Out By Blocking Businesses From New Internet Service]

"Our performance in the small end of the market continues to be especially strong, with growth driven by an expanding customer base and rate adjustments," said Michael Cavanagh, senior executive vice president and chief financial officer at Comcast. "At the same time, the contribution from midsized businesses continues to increase. There is a tremendous opportunity for growth in this segment, as we have captured only a 25 percent share of the small end of the market and less than 10 percent of the midsized segment."

The proposed $45 billion takeover of Time Warner Cable, which fell through after regulators opposed the acquisition, didn’t have much of an impact on Comcast’s earnings. However, the deal would have made Comcast a stronger competitor, said Darryl Senese, vice president of carrier services for Atrion Networking, a Warwick, R.I.-based IT solution provider and Comcast partner.

"In a short period of time, [Comcast] would have increased both their coverage area and LTE building footprints, which would help them continue to compete at a high level with the likes of Verizon, AT&T, etc. Additionally, they would have been able to jump-start their state-to-state connectivity, which is slowly being rolled out," Senese said.

According to the carrier, however, the failed bid hasn't affected Comcast shares, which rose about 10 percent since Comcast abandoned its takeover plans. Comcast is still expanding its local footprints and aggressively pricing its high-end Ethernet solutions within all of the markets it serves, without the help of Time Warner Cable's technology or infrastructure, Senese said. "For Atrion, [Comcast has] become a strong complement to the other telecom solutions we have offered for years, offering diverse connections that bypass the telephone companies' infrastructure with competitive offerings."

Comcast reported adjusted second-quarter earnings per share that grew 10.5 percent, to 84 cents, up from 76 cents last year. Cable Communications revenue increased 6.3 percent, to $11.7 billion, which reflected strength in high-speed data and business services, in addition to higher video revenue. Total revenue per customer relationship for the quarter rose 4.5 percent, also driven by business services and customers' subscribing to multiple products, according to the carrier.

"Our second quarter results, including 11.3 percent revenue growth and 8.0 percent operating cash flow growth, demonstrate the strength and momentum we are seeing across our businesses," said Comcast Chairman and CEO Brian Roberts in a statement. "In cable, high-speed Internet and business services continued to perform extremely well, and, significantly, this was the best second quarter video customer results we've had in nine years."

For cable communications, second-quarter capital expenditures increased to $183 million, or 12.3 percent, to $1.7 billion, about 14.3 percent up from 13.5 percent in Q2 2014. Comcast noted that the increase was driven by higher spending and deployments of the Comcast X1 entertainment platform and wireless gateways, as well as continued investment in network infrastructure, cloud-based initiatives, and overall expansion in the business services segment.

Comcast's most recent earnings were also bolstered by its recent box office successes from its NBCUniversal unit, including Jurassic World, according to the carrier.

PUBLISHED JULY 28, 2015