Comcast 2006 Annual Report Download - page 27

Management’s Discussion and Analysis of Financial Condition and Results of Operations
25 Comcast 2006 Annual Report
Introduction and Overview
We are the largest cable operator in the United States and offer a
variety of consumer entertainment and communication products and
services. As of December 31, 2006, our cable systems served approx-
imately 23.4 million video subscribers, 11 million high-speed Internet
subscribers and 2.4 million phone subscribers and passed approxi-
mately 45.7 million homes in 39 states and the District of Columbia.
We classify our operations in two reportable segments: Cable and
Programming. Our Cable segment, which generates approximately
95% of our consolidated revenues, manages and operates our
cable systems. Our Programming segment consists of our six
national programming networks. During 2006, our operations gen-
erated consolidated revenues of approximately $25 billion.
Our Cable segment earns revenues primarily through subscrip-
tions to our video, high-speed Internet and phone services (“cable
services”). Our video revenues continue to increase as a result of
digital subscriber growth and demand for our other digital cable
services, including video on demand, which we refer to as ON
DEMAND, Digital Video Recorder (“DVR”) and High Definition Tele-
vision (“HDTV”), as well as higher pricing on our basic video service.
As of December 31, 2006, approximately 51% of the homes in the
areas we serve subscribed to our video service and approximately
52% of those video subscribers subscribed to at least one of our
digital cable services. Our high-speed Internet service with Internet
access at downstream speeds from 6Mbps to 16Mbps, depending
on the level of service selected, has been one of our fastest
growing services over the past several years. As of December 31,
2006, approximately 25% of the homes in the areas we serve sub-
scribed to our high-speed Internet service. Comcast Digital Voice,
our phone service that provides unlimited local and domestic
long-distance calling and other features, is our most recent cable
service offering. As of December 31, 2006, approximately 6% of
the homes in the areas we serve subscribed to Comcast Digital
Voice. In 2006, we began offering our video, high-speed Internet
and Comcast Digital Voice services in a package that we refer to
as the “triple play.” In addition to cable services, other Cable seg-
ment revenue sources include advertising and the operation of our
regional sports and news networks.
Our Programming segment consists of our consolidated national
programming networks: E!, Style, The Golf Channel, VERSUS (for-
merly known as OLN), G4 and AZN Television. Revenue from our
Programming segment is earned primarily from advertising rev-
enues and from monthly per subscriber license fees paid by cable
and satellite distributors.
Our other business interests include Comcast Spectacor, which owns
the Philadelphia Flyers, the Philadelphia 76ers and two large multipur-
pose arenas in Philadelphia, and manages other facilities for sporting
events, concerts and other events. Comcast Spectacor and all other
consolidated businesses not included in our Cable or Programming
segments are included in “Corporate and Other” activities.
On January 31, 2007, our Board of Directors approved a three-
for-two stock split in the form of a 50% stock dividend (the “Stock
Split”) payable on February 21, 2007, to shareholders of record on
February 14, 2007. The number of shares outstanding and related
amounts have been adjusted to reflect the Stock Split for all peri-
ods presented.
2006 Financial and Operational Highlights
• consolidated revenue growth of 18.5% and consolidated operat-
ing income growth of 31.2%, both driven by results in our Cable
segment
• Cable segment revenue growth of 20.6% and growth in oper-
ating income before depreciation and amortization of 22.1%,
both driven by revenue generating units (“RGUs”) growth and
the success of our triple play offering, as well as growth from
acquisitions
2006 Business Developments
• completed transactions with Adelphia and Time Warner that
resulted in a net increase of 1.7 million video subscribers, a net
cash payment by us of approximately $1.5 billion and the dis-
position of our ownership interest in Time Warner Cable Inc.
(“TWC”) and Time Warner Entertainment Company, L.P. (“TWE”),
the assets of two cable system partnerships and the transfer of
our previously owned cable systems in Los Angeles, Cleveland
and Dallas. We collectively refer to these transactions as the
“Adelphia and Time Warner transactions.”
• initiated the dissolution of the Texas and Kansas City Cable
Partnership (“TKCCP”) that resulted in our acquisition of cable
systems serving Houston, Texas (approximately 700,000 video
subscribers) in January 2007
• acquired the cable systems of Susquehanna Communications
serving approximately 200,000 video subscribers for approxi-
mately $775 million
• acquired the 39.5% interest in E! Entertainment Television (which
operates the E! and Style programming networks) that we did
not already own for approximately $1.2 billion
• participated in a consortium of investors (“SpectrumCo”) that
acquired wireless spectrum licenses covering approximately
91% of the population in the United States for approximately
$2.4 billion (our portion was $1.3 billion)
• repurchased approximately 113 million shares (adjusted to reflect
the Stock Split) of our Class A Special common stock pursuant
to our Board-authorized share repurchase program for approxi-
mately $2.3 billion
Refer to Note 5 to our consolidated financial statements for infor-
mation about acquisitions and other significant events.