Cable Finishes Strong in First Quarter


Cable stocks held their own in the first
quarter — shares in MSOs were up a combined 13.5% and
programmers rose 9.5% as a group — building on momentum
from a strong fourth quarter and expectations that
subscriber metrics will continue to improve.

Charter Communications led the cable operators in
the first quarter, rising 30% ($11.69 each) to close at $50.63
per share on March 31. Other big gainers included Liberty
Global (up 17%, or $6.03 per share), Comcast (up 12.5%, or
$2.75 each) and Time Warner Cable (up 8%, or $5.31 each).
Liberty Global, the largest cable operator in Europe with
17.6 million customers, has been particularly aggressive
on the acquisitions front — it agreed to purchase German
cable giant KBW on March 21 and is among possible bidders
for cable assets in the Netherlands.

Comcast, the largest cable operator in the U.S., is riding
a wave of optimism after the closing of its landmark NBC
Universal joint venture and encouraging basic-subscriber
metrics in the fourth quarter.

Comcast lost about 135,000 basic subscribers in the
fourth quarter — beating analysts’ consensus estimates
of 206,000 customer losses. And many analysts are expecting
that momentum to continue.

Time Warner Cable’s 141,000 basic-subscriber losses
were in line with expectations, but the second-largest MSO
in the country turned analysts’ heads with a 20% increase
in its quarterly dividend.

Miller Tabak media analyst David Joyce said he expected
continued improvements in basic-subscriber metrics
across the industry because of improvements in the housing
market and in unemployment rates. February home
sales were up 3.3% over January and increased hiring cut
the national unemployment rate to 8.8% in March, its lowest
point in two years.

“That means there are going to be fewer losses, I believe,”
Joyce said, adding that initiatives to convert systems
to all-digital technology and providing faster Internet
speeds should continue
to drive digital-cable
and high-speed-data
customer growth.

Morgan Stanley media
analyst Ben Swinburne
agreed. In a
research note last week,
Swinburne estimated
that Comcast would
lose about 80,000 basic
customers in the first
quarter, slightly better
than the 82,000 it lost
in the first quarter last
year. For the full year,
Swinburne estimated
that Comcast would
lose about 600,000 basic
customers, 21% less
than the 757,000 it lost
in 2010.

Stock in Cablevision
Systems, long the
top performer among
MSOs, was af fected
by a loss of 35,000 basic
subscribers in the
fourth quarter — largely
due to a retransmission-
consent fight over
Fox owned-and-operated
TV stations — and
lingering sentiment
that it may not be able
to maintain the stellar growth pace of the past.

Programming stocks were boosted by a return of the advertising
market, with Viacom,
The Walt Disney Co. and News
Corp. all up by double-digit percentages.
The biggest gainers for
the quarter were Liberty Media
tracking stocks Liberty Capital
(which includes minority investments
in several media companies,
the Atlanta Braves baseball
team and a pair of TV stations)
and Liberty Starz, the tracking
stock that includes Starz LLC
premium channels. Liberty Capital
rose 17.8% in the quarter (up
$11.11 per share) and Liberty Starz
rose 16.7% (or $11. 12 each), mainly
because of plans to spin off the

Viacom, buoyed by the ratings
strength of MTV shows like Jersey
Shore and Teen Mom, reported
a 10% increase in domestic advertising
in the fiscal first quarter ended
Dec. 31, with Disney and News
Corp. also reporting double digit
increases for their cable networks.

That growth is expected to
continue — Joyce has estimated
that the current upfront could
reap as much as $9 billion for cable
networks, an 11.5% increase
over last year. He also projected
that total ad revenue for cable
networks could reach $23.5
billion in 2011, up almost 11%.