No. 1 U.S. cable operator Comcast Corp lost more video subscribers than expected in the second quarter amid the weak economy and stiff competition from phone and satellite companies, but profit beat forecasts due to better cost controls and tax gains.

Profitability was aided by selling more high-end services like HD digital video recorders, and the slowdown in customer growth meant Comcast spent less on new installations and equipment.

The company resumed its share buyback program during the quarter.

Comcast executives said trends for the current quarter were looking better in terms of winning Internet and phone customers. But they said the recession and competition continue to slow customer growth.

The weak economy continues to negatively impact the consumer, providing us with fewer opportunities to sell new services, Chief Financial Officer Michael Angelakis said on a conference call with analysts.

Angelakis said the company expects subscriber additions to remain challenging in the current environment.

Comcast lost more than 214,000 basic video subscribers during the second quarter, sending its total video customer base below 24 million. Its video customer losses were softened by the extension of the U.S. government-mandated digital TV transition to June 12. Analysts from Collins Stewart had expected Comcast to lose 165,000 subscribers.

Second-quarter net profit was 33 cents a share, 7 cents above the average forecast of analysts polled by Reuters Estimates.

Revenue rose 4.5 percent to $8.938 billion. Average revenue per subscriber rose 7.4 percent to $117.74. Comcast said results included favorable settlements related to federal and state taxes.

The results were mixed, with financials doing better than we expected but subscriber additions missing our forecasts, said Thomas Eagan, an analyst at Collins Stewart.

Stiffer competition and the weak economy meant Comcast experienced a 65 percent drop in the number of new services it sold during the period.

Cable companies such as Comcast and Time Warner Cable Inc have been battling harder to win customers amid competition from satellite TV services from DirecTV Group and DISH Network and fledgling video services from phone companies AT&T Inc and Verizon Communications .


Comcast added just 65,000 high-speed Internet customers during the second quarter, less than a quarter of the number it added a year earlier and a big drop from the some 300,000 added in the first quarter.

Chief Executive Officer Brian Roberts said the low number was not a trend but reflected a decision by the company to focus its marketing efforts on winning video customers in the run-up to the digital TV transition on June 12.

Comcast said it already added more Internet subscribers in July than it did in the three months of the second quarter.

Comcast added 233,000 digital phone subscribers in the second quarter, less than half the number it added a year ago. It added 250,000 digital video subscribers, compared with 320,000 a year ago.

The company said it had restarted its share buyback program, which it suspended in the third quarter of 2008. It bought back 15.5 million shares during the second quarter.

Investors had criticized the company's decision to hold onto its cash during the credit crisis last year, except for a modest increase in its dividend.

The headline of these results was the resumption of the share buyback, said Chris Marangi, an analyst for Gabelli & Co, which owns Comcast shares.

The shares were up 4 cents to $15.10 in midday trading on the Nasdaq.

(Reporting by Yinka Adegoke; editing by John Wallace)