Analyst: Expect Seasonal Losses in 2Q

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The second-quarter earn­ings season kicks off Aug. 2, with Comcast Corp. first out of the blocks, and Sanford C. Bernstein and Co. Inc. cable analyst Craig Moffett said investors should expect continued basic-sub­scriber losses.

Moffett put out a research report Monday saying that while the second quarter is typically weak for cable -- as college stu­dents and snowbirds leave for summer residences and disconnect service -- Comcast could be hit especially hard due to the slow rollout of its voice-over-Internet-proto­col telephony product.

“The second quarter was supposed to be Comcast’s coming-out party for VoIP,” Moffett wrote. “No such luck.”

Moffett said financial results for the top U.S. MSO should re­main in line with estimates -- revenue at $5.57 billion, cash flow at $2.19 billion. He also expects Comcast to lose 43,000 basic subscribers but gain 183,000 digital customers and add 318,000 high-speed-data customers.

Comcast should lose about 45,000 circuit-switched-tele­phone customers, offset by the addition of 28,000 new digital-phone subscribers.

But Moffett added that visibility into Comcast’s progress with digital-voice rollouts will be important, especially as tel­co competitors have recently begun substantial price discounts to their digital-sub­scriber-line high-speed-Inter­net offerings.

He said basic-subscriber losses could be misconstrued as being tied to the telco price cuts -- SBC Communications Inc. recently began a $14.95-per-month promotional offering for its DSL service.

He added that because of the slower voice rollout, Comcast stock is trading at its lowest multiple in years -- about 7.8 times forward cash flow.

Cablevision Systems Corp. (report­ing earnings Aug. 9) has been less affected by seasonality than other MSOs, and the sec­ond quarter isn’t expected to be any different. Moffett ex­pects Cablevision to report a gain of 11,000 basic subscrib­ers in the second quarter. He also predicted that the MSO will add 111,000 digital-cable cus­tomers, 52,000 high-speed-data subscribers and 94,000 VoIP customers.

But investors are expected to pay little attention to those metrics, Moffett wrote, especially with a buyout offer from the MSO’s controlling Dolan family to acquire the remain­ing shares of Cablevision stock they don’t already own. That offer -- worth about $7.9 billion -- is currently being evaluat­ed by a committee of indepen­dent Cablevision directors.

Moffett said investors will be looking to see if the Dolan fam­ily is forced to increase its of­fer, or if there will be a sale of Cablevision’s Rainbow Media Holdings LLC programming assets.

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