The Wall Street Journal-20080215-Comcast Plans --36-7 Billion Buyback- Dividend Payment Also Is Part of Move To Satisfy Holders

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Comcast Plans $7 Billion Buyback; Dividend Payment Also Is Part of Move To Satisfy Holders

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After months of being assailed by shareholders upset over a plunging stock price and slow response to competition from phone companies, Comcast Corp. yesterday answered its critics.

The cable company said it would start paying a 25-cents-a-year dividend -- its first since 1999 -- and buy back $7 billion in stock by the end of 2009, reacting to investors demanding the company return more cash to shareholders. As for demands that Comcast take on its phone and satellite rivals more aggressively, the company is adopting more competitive pricing plans for its TV, Internet and phone services and boosting spending on marketing and customer service.

"We have changed some of our marketing tactics and how we compete," Chief Executive Brian Roberts said in an interview. On a conference call with Wall Street analysts, Chief Operating Officer Steve Burke said, "We are budgeting to come out swinging, and that is both on the marketing side and the investment and product development and customer service."

The new strategy was outlined as the company reported sharply higher fourth-quarter earnings, boosted by acquisitions as well as a strong showing by the company's video offering. Comcast had damped Wall Street's expectations in December when it said it expected to sign fewer new customers than it forecast earlier in the year. The company has attributed the slowdown both to competition and to the souring economy.

News of the dividend sent Comcast's stock rising 8%, although some analysts cautioned that the company's guidance for the coming year was lower than expected -- a reflection of the competition's impact on Comcast's business.

"The results themselves were clearly overshadowed by the pyrotechnics around the dividend and share purchase," Sanford C. Bernstein & Co. analyst Craig Moffett said. "Investors have waited a long time for a clear signal from management about how and when cash will be returned to shareholders, and they finally got what they have waited for."

The dividend and buyback measures followed announcements by Comcast Wednesday night that Comcast founder Ralph Roberts, CEO Brian Roberts's father, would reduce his compensation and executives would elect not to receive full bonuses.

The new attitude that emerged from Comcast executives both on a conference call with analysts and in an interview later on how the company will deal with competition was a distinct change for a company that last year appeared to be caught flat-footed by Verizon Communications Inc.'s effort to market and deploy a new TV service. After once scoffing at the threat posed by Verizon, Comcast executives now concede they are losing customers to the phone company.

"There's no question Verizon is real and is taking some subscribers from us," Mr. Burke said on the conference call. "We believe we're taking a multiple of the subscribers from them on the phone side that they're taking from us on the video side."

Analysts said Comcast fell short in the fourth quarter in key areas, such as high-speed Internet, which added fewer subscribers than some had forecast. Cable has long been able to offer faster Internet connections than phone companies' digital-subscriber-line offerings, but a new service being built by Verizon is allowing companies to surpass cable with faster speeds. Comcast and other cable companies hope to deploy a new technology in coming months that will help them catch up.

Among the new initiatives Comcast announced yesterday was a new $24.95 tier of high-speed Internet service, well below the $42.95 price that Comcast has charged since introducing broadband several years ago. Phone companies have for some time offered varying price tiers for high-speed Internet services, with lower prices for slower speeds. But Brian Roberts had long held firm to offering a higher price than most phone companies, a strategy that some in the industry think now was a mistake.

"Brian has been the most resistant to lower-priced packages at slower speeds," said cable-industry veteran John Malone, who is close to Mr. Roberts and generally applauds his leadership. "He chose to keep a high price on his high-speed service and I think as a result he gave up some market share to the telcos," Mr. Malone said, speaking in a recent interview.

"We waited as long as possible to offer multiple tiers of products and we think now is the right time," Mr. Roberts said yesterday.

Comcast is also broadening the range of product bundles it offers. Instead of a single offering -- $99 for TV, Internet and phone -- it will let consumers subscribe only to phone and Internet for $49 a month, or phone and TV for $69 a month. AT&T Inc. recently announced a similar tactic in some markets.

"Not everyone wants triple play," Mr. Roberts said. Offering phone service, he said, "allows us a lot more flexibility to go after customers who don't take any of our products."

The company also signaled its intention to invest in customer service. Even people close to Comcast say years-old complaints about the company's customer service haven't been addressed. "The company has been working on improving customer service for years and will continue to do so," said D'Arcy Rudnay, senior vice president of Comcast.