updated 10/25/2007 1:55:38 PM ET 2007-10-25T17:55:38

Comcast Corp., the nation's biggest cable TV systems operator, said Thursday that its third-quarter profit fell 54 percent and new customer additions slowed amid intensified competition from phone and satellite TV companies.

Comcast shares fell nearly 10 percent in midday trading.

Comcast earned $560 million, or 18 cents per share, in the three months ended Sept. 30 compared with $1.22 billion, or 38 cents, in the same quarter a year ago.

The decline also reflected a comparison with year-ago results that included $669 million in one-time gains related to Comcast's purchase of Adelphia's cable assets and a swap of cable systems with Time Warner Cable Inc. Excluding these gains, Comcast would have seen profits rise by 2 percent from last year's $548 million in adjusted earnings.

Revenue rose by 21 percent to $7.78 billion from $6.43 billion a year ago.

Analysts polled by Thomson Financial were expecting, on average, earnings of 18 cents per share on revenue of $7.76 billion.

Its shares fell $2.34, or 9.8 percent, to $21.51 in midday trading after sinking earlier to 52-week low of $21.35.

Looking ahead, Comcast said it expects a softening economy, an accelerated exit from its circuit-switched phone business and increased competition to affect full-year results.

To fight back, Comcast said next year it plans to start direct-mail marketing of a lower-priced Internet service for dial-up customers that is slower than its standard high-speed service.

The Philadelphia-based cable company said phone companies have ratcheted up promotions as they lose customers to Comcast's digital voice service. Satellite TV providers have done the same as consumers leave to snap up Comcast's discounted triple play package of video, Internet and phone.

Steve Burke, Comcast's chief operating officer, cited AT&T Inc.'s offer of free high-definition programming for a year for certain new customers.

Phone and satellite TV companies are "spending a lot more money and discounting more than ever before," he said in a conference call with analysts.

But Brian Roberts, Comcast's chief executive, said the company has superior high-definition programming and plans to do a better job of marketing it.

"We're going to shout it out from the rooftops to the consumer, perhaps more strongly than we have," he said.

For the third quarter, revenue generating units, a key measure of cable subscriber growth, fell 6.7 percent to 1.4 million. It is the first year-over-year decrease for any quarter in at least three-and-a-half years.

RGUs count the number of individually subscribed services, so two customers each subscribing to digital cable and high-speed Internet count as four RGUs.

Comcast added 489,000 new digital video subscribers in the quarter, down 12 percent from last year, to 14.7 million customers. The number of digital video customers is a subset of basic subscribers, which fell by 65,000 to 24.2 million. A year ago, basic subscribers rose by 11,000.

However, the company pointed out that 61 percent of basic subscribers have upgraded to digital, up from 50 percent a year ago.

Comcast attracted 450,000 new high-speed data customers, down 16 percent from a year ago, for a total of 12.9 million. As for its phone service, digital voice added 662,000 consumers, up 36 percent from last year, to 3.8 million. Comcast's circuit-switched phone service, which the company is exiting, lost 138,000 subscribers for a remainder of 304,000.

But the company was able to prop up its revenue for the most part. Revenue from video customers on average came to $60.72 a month, up 5 percent from last year, while digital voice revenue was $41.35 a month compared with $44.90 in the same quarter in 2006.

High-speed data revenue fell, however, to $42.86 a month, from $42.90 a year ago, reflecting the bite from promotional Internet packages touted by the phone companies.

In the quarter, operating income rose by 14 percent to $1.4 billion, but free cash flow was cut in half to $524 million.

"It's still a company that's growing strongly," said Craig Moffett, an analyst at Sanford Bernstein. "But every single growth margin was just a hairsbreadth light."

Meanwhile, Comcast's capital expenditures rose by 19 percent to $1.5 billion in the quarter as it upgraded Adelphia's systems, bought equipment and added employees to handle increased business. The company expects capital expenditures to decrease as a percentage of revenue in 2008.

Comcast also authorized another $7 billion for stock buybacks.

© 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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