Comcast Corp. (CMCSA) continues to perform well despite volatile market conditions. The company’s cable segment is performing exceptionally well coupled with increased contribution from NBC Universal. Although the company continues to suffer video subscriber losses, the rate of subscriber loss actually plummeted by a whopping 40% year over year. At present, Comcast turned out to be a diversified entertainment house, offering cable-TV, faster Internet connectivity, producing rich TV and film contents and also operating a series of theme parks.
We remain quite optimistic regarding the company’s decision to sell spectrum to Verizon Wireless and entering a product reselling deal with the latter. Verizon Wireless is a joint venture between Verizon Communications Inc. (VZ) and Vodafone Group plc. (VOD). If this deal gets regulatory approval, then Comcast can include 4G LTE wireless services in its offerings. Comcast recently decided to sell the wireless spectrums it is hording through SpectrumCo venture to Verizon Wireless for approximately $2.3 billion. The company purchased these airwaves five years ago for approximately $1.3 billion. Comcast is now expected to get 78% return for this investment.
Comcast is all set to become a media powerhouse armed with a unique control over both content and distribution after completing the acquisition of a controlling stake in NBC Universal. Currently, Comcast serves one-fourth of the U.S.’s pay-TV households supported by a large content-creation empire. NBC Universal is U.S.’s fourth largest media company enriched with vast content library. Comcast, known for highly efficient management tactics, may now significantly develop NBC Universal’s sports and movie theaters that collect hefty fees from cable operators.
However, competition from fiber-based TV and online video streaming operators are near-term concerns. We therefore, maintain our long-term Neutral recommendation on Comcast.
