NEW YORK (Reuters) - Comcast Corp CMCSA.O lost more video subscribers than expected in the fourth quarter due to stiffer competition from phone companies, and said it would not complete its share buyback program this year, pushing its shares down 5 percent.

Comcast Corp. Chairman and CEO Brian Roberts speaks at a panel discussion during the Beyond Primetime conference in New York February 5, 2007. REUTERS/Eric Thayer

While the largest U.S. cable operator raised its annual dividend by 8 percent to 27 cents a share, analysts said the increase was conservative relative to a 56 percent rise in Comcast’s 2008 free cash flow -- a measure of cash generated by its operations after expenses have been paid.

“The shares are reacting to their capital allocation decision. We would have favored a return of capital through a share buyback rather than a dividend,” said Chris Marangi, a portfolio manager at Gabelli & Co, which owns Comcast shares.

Comcast, which had suspended share buybacks last quarter due to the uncertain credit environment, said on Wednesday it would focus its cash on reducing its debt load.

Excluding a $600 million writedown of its stake in wireless company Clearwire Corp CLWR.O and other one-time expenses, its quarterly profit was 27 cents a share compared with the average Wall Street estimate of 22 cents, according to a poll by Reuters Estimates.

Net profit fell 32 percent to $412 million, or 14 cents a share compared with $602 million, or 20 cents a share in the year ago quarter.

Revenue rose 7 percent to $8.765 billion during the quarter, beating the average Wall Street forecast of $8.63 billion.

“I think the market may have been bracing for lower customer additions and for results to be disappointing but their financials were better than the market expected,” said Collins Stewart analyst Thomas Eagan.

The company posted a significant slowdown in subscriber growth due to the recession and competition for customers. It lost 233,000 basic video subscribers during the quarter, more than the loss of 117,000 expected by Sanford Bernstein analyst Craig Moffett.

Comcast added 247,000 digital video customers and 184,000 high speed Internet subscribers but Moffett had been expecting additions of 466,000 digital subscribers and 284,000 Internet subscribers.

Phone subscriber additions, previously the growth engine, totaled 340,000 subscribers, compared with Moffett’s estimate of 425,000.

Cable companies have been winning phone customers from companies such as AT&T Inc T.N and Verizon Communications VZ.N. But Comcast and its peers have started to see the same 'cord cutting' that the phone companies face as more households drop traditional phone lines for cell phones only.

Comcast met expectations of total average revenue per user which came in at $113.80 a month. Executives at the company have focused in recent quarter of improving this metric rather than chasing market share.

Shares of Comcast fell 5.04 percent to $12.24 in morning trading.