Analysts: Show the Street the Spending

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Chicago -- Morgan Stanley Dean Witter & Co. Inc.'s Rich Bilotti, an
influential cable analyst, opined on a panel at the National Show here Monday
that Wall Street would get a better handle on the business if MSOs showed in
greater detail how spending translates into profits.

"You are a growth industry -- your past was built upon growing and your
future is built upon growing," Bilotti said at a standing-room session hosted by
Insight Communications Co. Inc. chief operating officer Kim Kelly.

But the Adelphia Communications Corp. bankruptcy, among other things, has led
investors to distrust capital spending.

Bilotti used telephony spending as an example. Cox Communications Inc., he
said, enjoyed a 20% incremental return on invested capital in its telephony
product last year. "There isn't a portfolio manager in the country right now who
wouldn't give his eye teeth to earn 20% on a dollar of capital," he added.

Credit Suisse First Boston LLC cable and telephony analyst Lara Warner
agreed, but also warned that high-speed-data service -- cable's biggest profit
pump -- could come under pressure from competing regional Bell operating
companies.

Warner said the phone companies consider digital subscriber line a tool to
help keep their core local and long-distance telephone customers from defecting,
so they're willing to weather some losses on the smaller DSL side of the
business to keep that base.

UBS Warburg LLC analyst Aryeh Bourkoff said the biggest opportunity for MSOs
to improve their average revenue per subscriber is Internet-protocol
telephony.

Bourkoff added that as video and data growth slows, aggressively rolling out
telephony could push cable valuations to the $5,500-per-subscriber range and
higher. Current valuations range from $2,700 to $3,600 per subscriber.

Niraj Gupta, managing director at Citigroup Smith Barney, echoing the other
analysts thematically, urged operators to "step on the accelerator."

Key revenue opportunities he highlighted were partnering with retail on HDTV
sales, developing high-speed-data applications to drive penetration and going
after the local-phone business aggressively.

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