Roberts Not High on Comcast Stock Buyback
CEO Maintains Enthusiasm for Triple-Play Offering
By Mike Farrell -- Multichannel News, 5/30/2007 5:26:00 PM
Comcast chairman and CEO Brian Roberts maintained his enthusiasm for the triple play of video, voice and data services at an industry conference Wednesday, but he appeared to downplay suggestions that the company increase leverage to substantially boost its ability to buy back its own stock.
Roberts -- who in the past has called the triple play “the gift that keeps on giving” -- said he saw no signs that growth in all three services will decline anytime soon, adding that with voice penetration of about 7%, Comcast is just beginning to see the growth in that part of the business.
“We haven’t peaked in any market yet, including the markets we have had for a couple of years” Roberts said at the Sanford Bernstein Strategic Decisions Conference in New York Wednesday.
He pointed to growth in the MSO’s high-speed-data product, which Comcast has been selling for eight years. Comcast expects to sell more high-speed data in 2007 than in any year in its history. As far as the phone product, with just 7% penetration, Roberts believes there is substantial room for growth.
“Having a conversation about slowing down is not a conversation that I think we should be having,” he added.
But Roberts appeared to downplay questions from moderator Sanford Bernstein analyst Craig Moffett concerning taking advantage of cheap debt and a cheap equity price to substantially increase its share-buyback program.
Earlier this month, Moffett wrote a report that opined that the Roberts family could take Comcast private by increasing leverage from its current 2.5 times cash flow to 8.5 times and using that money to purchase the remaining shares in the company the family does not own.
While Comcast has used its free cash flow (cash flow after capital expenditures and interest payments are made) to buy back shares in the past, Roberts said the company has two other priorities for those funds.
“Our first priority is to put it back into the business,” he added. “Our second priority is if we can find new things to invest in, like CIM [Comcast Interactive Media, its technology investment vehicle], and the third has been to buy back stock.”
Roberts said that while Comcast’s debt-to-cash-flow ratio is low at 2.5 times, it still carries a debt load of about $30 billion. And while interest rates are low and the market continues to encourage higher and higher levels of debt, that may not always be the case.
“The only tension is: Should we borrow ahead of that story and buy it now, or wait and do it as you go?” Roberts added. “What we have said is when you have $30 billion of debt, it may seem underleveraged to you, but there have been times when Wall Street turns off the spigot on financing and turns the spigot on.”
And while some companies have used share-buyback programs to show their bullish stance on the cable industry in general, Roberts said Comcast has taken another tack -- it’s been buying cable companies. Since its 2002 purchase of AT&T Broadband for about $60 billion, Roberts said Comcast has done about $15 billion worth of cable deals in the past few years, including its joint purchase of Adelphia Communications with Time Warner.
Comcast, he said, also bought back about 12% of its stock in that period.
“We’ve taken $20 billion of debt to $30 billion in debt [in that time period],” he added. “We’re conservative. That’s probably, in some eyes of investors, a fault.”
In other Comcast news, Roberts sold 350,000 shares of common stock in the company, according to a Securities and Exchange Commission filing Tuesday, AP reported.
Roberts sold the shares May 24 and 25 at $26.80-$27 apiece, according to AP.
