• E-mail
• Print
• Comment
• Font Size
• Digg
• del.icio.us
• Discuss article

Comcast Plans to Offernational Phone Service

Posted on: Thursday, 27 May 2004, 06:00 CDT

Comcast Corp., the Bay Area's cable-television operator, said it plans to offer digital phone service to almost all its customers by the end of 2006. Chief Executive Brian Roberts will succeed C. Michael Armstrong as chairman.

Comcast will begin offering phone service in three cities this year as it prepares to expand nationwide, Roberts, 44, said at the company's annual meeting in Philadelphia.

Roberts plans to sell the digital phone service, which costs less than traditional phone lines and can provide more features such as video calling, to win more customers and boost sales. He is competing with Verizon Communications Inc. and other regional phone carriers, which have teamed with satellite-television operators to offer Web access, phone service and TV-programming, for those subscribers.

"Once Comcast gets focused on this, they will be extremely effective," Wayne Wilbanks, chief investment officer of Wilbanks, Smith & Thomas Asset Management in Norfolk, Va., said in an interview. His firm owns 324,000 shares of Comcast. "Verizon is going to get hit."

Comcast will this year begin offering the phone service in Philadelphia, Indianapolis and Springfield, Mass.

, over its cable systems using so-called Voice over Internet Protocol technology, Roberts said. The Philadelphia-based company had 1.3 million customers for its traditional circuit-switch telephony systems at the end of 2003.

"The phone companies won't just sit still and watch them take share," Qaisar Hasan, an analyst at Utendahl Capital Partners LP in New York, said in an interview. "They will be more aggressive in data and in video bundles." Hasan rates Comcast shares "equalweight" and said he doesn't own any.

Cox Communications Inc. and Cablevision Systems Corp. began selling digital-phone services last year.

Roberts, who owns 33 percent of Comcast's voting rights, became chief executive after Comcast almost tripled in size by acquiring AT&T Corp.'s cable systems in November 2002 for $56 billion.

He earned $8 million in salary and bonus last year. Comcast's stock gained 45 percent in the 14 months following that acquisition.

Armstrong is leaving the company, which he joined after Comcast bought AT&T's cable systems, to spend more time with his family, Roberts told investors at the company's annual meeting.

Comcast has flunked a corporate governance test from the Corporate Library, which ranked it the same as Disney. Comcast got an "F" from the investor advisory group, which provides corporate governance evaluations to clients such as Morgan Stanley and Marsh & McLennan Cos.

The Corporate Library said six of Comcast's 12 directors either work for the company or have business ties to it. It also said Roberts exerts too much control over the company.

Having Roberts serve as chairman and chief executive may spur objections from corporate governance experts, said Drake Johnstone, an analyst at Davenport & Co.

"I'm surprised that Comcast didn't decide to have a separate, independent chairman," Johnstone said in an interview. He rates the shares "neutral" and doesn't own them.

Roberts last month withdrew his $54.1 billion unsolicited bid for Walt Disney Co. after failing to persuade investors of the merits of combining entertainment assets with his cable systems.

Disney Chief Executive Michael Eisner was forced to cede his chairman title to George Mitchell after failing to receive support from 45 percent of shares voted at the company's annual meeting. Roberts Wednesday received the support of more than 90 percent of the shares voted at Comcast's annual meeting for his re-election to the board.

As chief executive of AT&T, Armstrong, 65, spent more than $112 billion buying cable-television providers such as Tele- Communications Inc., expanding overseas and acquiring stakes in start-up businesses since 1998.

His plan was to turn the then-biggest U.S. long-distance phone carrier into a company that would also offer high-speed Internet access and movies. Armstrong began selling the businesses he acquired at losses after demand for telecommunications services slumped.

More News in this Category