Cable Ops Report Mixed Q2


The cable earnings season kicked off last week on a familiar
note, with Comcast continuing its string of basic-video
loss reductions and Time Warner Cable turning in another
strong period of financial growth.

Comcast lost about 176,000 basic video subscribers
in the second quarter, soundly beating analysts’ estimates
and well below
the 238,000 video customers
lost in the prior
year. It was the seventh
consecutive quarter of
basic-video subscriber
loss improvements for

On a conference call
with analysts, Comcast
Cable CEO Neil Smit
said the subscriber performance
was due to a
combination of strong
product offerings, improved
customer service
and more targeted marketing.

He said Comcast has
reduced truck rolls by
about 8 million over the past two years, has increased revenue-
generating units by 2.8 million in that time frame and
is on pace for 1 billion self-install transactions in 2012.

“Comcast is making believers out of those of us who
thought it impossible for cable MSOs to ever grow video
subs again,” Credit Suisse media analyst Stefan Anninger
wrote in a research note.

While Comcast continued to impress on the subscriber
front, Time Warner Cable fell short of analysts’ estimates,
losing 169,000 basic customers and overshadowing what
otherwise was a strong quarter.

Most analysts expected TWC to lose between 120,000
and 150,000 basic video subscribers in the period. The MSO
did worse than that — and worse than Q2 2011 losses of
130,000 basic video customers — but it beat estimates on
high-speed Internet additions, with 72,000 net adds (including
13,000 business customers) vs. consensus estimates of
about 66,000. Its 45,000 voice additions slightly missed consensus
estimates for a gain of 49,000 phone customers.

The picture was brighter on the financial side, aided by a
small (3.7%) increase in programming costs per subscriber.
Revenue for the period increased 9.3% to $5.4 billion,
and adjusted operating income before depreciation and
amortization (OIBDA) increased 10.3% to $2 billion, aided
primarily by the recent acquisitions of Insight Communications
and NewWave Communications.

DirecTV posted its first-ever quarterly net new U.S. subscriber
loss — 52,000 in the period — and though it was
worse than what some analysts had predicted, it didn’t
come as a surprise as the losses were driven mainly by efforts
to reduce churn and attract higher-quality, paying

The Latin American operations continued to shine in
the quarter; revenue increased 20% to $1.5 billion, and
OPBDA rose 5% to $445 million. Latin America also added
a record 645,000 net new subscribers in the period.

On a conference call with analysts, DirecTV CEO Mike
White argued that those higher-quality U.S. customers
bring additional value over the life of their relationship
with the satellite giant — between 20% and 25% more —
by purchasing advanced products.

Investors weren’t totally convinced; DirecTV stock declined
as much as 4.2% ($2.09 per share) to $48.01 each in
early trading Aug. 2, closing down 2.6% ($1.30) to $48.80

On the plus side, revenue rose 7%, and operating profit
before depreciation and amortization (OPBDA) increased
9.6% in its U.S. operations in the period, indicating that
the satellite giant is winning more higher-paying customers.
The company ended the quarter with 19.9 million customers
in the U.S.

Canaccord Genuity media analyst Tom Eagan predicted
third-quarter net new subscriber gains of more than