Stopping the Bleed

After a month of bad news and even worse stock declines, a handful of cable operators will face the heat from investors as the year-end cable conference season kicks off this week, with UBS Securities’ Media & Communications conference in Manhattan Dec. 3 through Dec. 5.

Basic subscriber losses and competition with telephone companies are likely to be at the top of attendees’ minds during the conference. And those same attendees — mainly fund managers and hedge fund executives who have been big buyers of cable stocks in the past — will be looking for answers as to how cable companies plan to stop the bleeding.

Whether they get those answers is another question.

Miller Tabak media analyst David Joyce said subscriber losses; competition (especially with Verizon Communications); progress on the rollout of switched digital video systems; and experiments with lower tiers of high-speed Internet service will all be top of mind for investors.

But he said cable companies will likely be loath to give out too many answers.

“It’s still pretty fresh after they reported earnings, so I don’t think there is going to be any new commentary or updates,” Joyce said. “They’ll just continue to hammer the point home that there are still a lot of areas of growth here.”

That growth, he added, includes opportunities to upsell broadband speed and digital video tiers, as well as commercial data and telephony products.

According to the conference agenda, Comcast, Time Warner Cable, Charter Communications, RCN and Knology are all set to present over the four-day conference.

Less than one month later, those same operators will travel to Phoenix, Ariz., for the Citigroup Entertainment, Media & Telecommunications conference on Jan. 8-10.

Cable stocks, after an impressive 2006 run — the sector rose about 60% — lost momentum in 2007.

After a relatively modest decline in the first nine months of the year — the five major operator stocks were down just 7% as of Sept. 30 — cable shares fell off a cliff in November, on disappointing third-quarter results.

Cable stocks were down 23.5% between Sept. 28 and Nov. 27, with Time Warner Cable and Comcast falling the hardest. During that period, Comcast stock fell 19.5% ($4.71), to $19.47 from $24.18. Time Warner Cable dipped 26.7% ($8.77) in the same period to $24.03 from $32.80 per share.

The decline in stock price has also translated into a huge dip in market capitalization. For the year, Comcast has shed almost $27 billion off its market value (it lost nearly $14 billion in market cap between Sept. 28 and Nov. 27).

Time Warner Cable, which began trading as a separate public company on March 1, has shed about $14.5 billion in market cap so far this year ($8.6 billion in the past two months alone).

Marring what was basically healthy financial performance — most operators maintained double-digit revenue and cash flow growth in the third quarter — was a sharp decline in basic subscribers, with the biggest drop-offs coming from the top three publicly traded operators. Comcast lost 65,000 basic customers in the third quarter, Time Warner Cable lost 83,000 basic customers and Charter lost 40,000 basic subscribers in what is typically a rebound period for cable systems.