Cable Operators

Slow Summer Won’t Buck Trend: Analysts

7/30/2012 12:01 AM Eastern

Subscriber losses that typify the second quarter are expected
to continue as cable operators head into the earnings
season over the next few weeks.

But most analysts expect a continuation of the recent
trend toward fewer defections on the video side.

Cable operators have been on a roll for the past several
quarters, led by Comcast, which reduced basicsubscriber
losses by 40% in 2011.

When Comcast reports
second-quarter
results on Aug. 1,
analysts expect basic
video losses to range
from 215,000 (Morgan
Stanley media
analyst Ben Swinburne) to 125,000 (Canaccord Genuity
analyst Tom Eagan).

Either way, it should be an improvement from the
238,000 basic video customers the nation’s largest cable
company shed in the second
quarter a year ago.

Swinburne, Eagan and Pivotal
Research Group principal and
media & communications analyst
Jeff Wlodarczak expect the
four top publicly traded cable operators
(Comcast, Time Warner
Cable, Charter Communications
and Cablevision Systems) to collectively
improve on video losses
suffered in 2011’s second quarter.

TWC LAGGING

Time Warner Cable might be the
lone company expected to see bigger losses. Swinburne
expects a loss of 150,000 basic video subscribers in the
quarter, versus 144,000 the prior year. Wlodarczak predicts
TWC’s video losses to be flat versus
a year ago.

Cablevision subtracted about 23,000
basic video customers in the second quarter
last year. In this year’s Q2, Swinburne
and Eagan expect a gain of 1,000 or 5,000
video customers, respectively.

The industry’s high-speed data additions
should also continue an upward
trajectory, with Comcast expected to add
91,000 to 97,000 customers, according to
analysts.

Time Warner Cable should add 50,000
to 65,000 high-speed Internet customers.
Charter comes next, with 19,000 to
36,000 additions, depending on the forecast,
and Cablevision with an estimated
10,000 to 20,000 new data customers.

Long-time cable investors are well aware of secondquarter
seasonality, when snowbirds and college students
disconnect service as they move to summer residences.

But Wlodarczak wondered
if the slower growth will affect
what has been a strong rise in
cable stocks this year.

The sector was up about 25%
in the first six months of the
year and so far in July cable
MSO shares have risen a collective
2%.

On the competitive front,
Verizon Communications and
AT&T reported lower-thanexpected
video-customer additions
in the second quarter.
Still, cable stocks could be in for
at least a temporary decline, forecasters say.

“Cable has much better prospects and is cheaper but I
would not be surprised to see them all temporarily trade
in with results,” Wlodarczak said. “It will create a nice
opportunity for folks.”

SATELLITE SIDE

On the satellite side, Dish Network released preliminary
subscriber figures as part of a debt filing. In it, Dish reported
a loss of about 10,000 net subscribers as of June
30, which is soundly better than analysts’ consensus estimates
of a loss of 85,000 net customers. Gross subscriber
additions at 665,000 were 16% ahead of last year’s
572,000 gross additions.

DirecTV, though, is expected to head into negative
subscriber territory in the second quarter, fueled by its
continuing plan to reduce churn.

DirecTV slashed average monthly churn by six basis
points to 1.4% in the first quarter and efforts to lower that
mark even further will likely result in lower gross additions.
Analysts are predicting DirecTV will shed 22,000 to 49,000
net subscribers in the period. Customer metrics are expected
to pick up in subsequent quarters and the satellite giant
should finish the year with positive subscriber growth.

TAKEAWAY

The four biggest cable operators
will collectively improve on
their sub-loss numbers from
second-quarter 2011.

November

Next TV

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