Comcast Shines Again as TWC, Cablevision Report Sluggish Q2

Some Analysts Believe TWC’s Results Could Fuel Potential Charter Deal
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Cable earnings seasons kicked off last week with three of the four publicly traded MSOs reporting results, and once again Comcast shined the brightest, turning in another quarter of improved video customer losses despite an aggressive push by its telco-TV competition.

For the other MSOs releasing results — Time Warner Cable and Cablevision Systems — sluggish operating performance seemed to reinvigorate acquisition speculation, which in turn boosted their stocks.

Comcast was first out of the block on July 31 and set the bar high with its second-quarter results. The Philadelphia-based MSO again improved basic-video customer losses, shedding 159,000 basic-video subscribers, better than the 176,000 it lost in the prior year. It was the ninth quarter out of the past 10 in which the company has shown such improvement.

High-speed Internet customer additions also improved in the period, to 187,000 versus 156,000 in the prior year, as did telephony additions, to 161,000 compared with 158,000 in 2012.

“Comcast’s second quarter in the cable business was about as good as it gets,” Moffett Research principal and senior analyst Craig Moffett wrote in a note to clients. “In a seasonally weak Q2, [it] lost fewer video subscribers than last year and gained more of everything else.”

Such was not the case with Cablevision and Time Warner Cable. Cablevision, which has been a victim of its own success — it has the highest penetration rates in the industry for every service — lost 20,000 basic-video customers in the period, adding just 1,000 high-speed Internet customers and 3,000 phone customers. Cablevision stock rose more than 6% ($1.14 per share) to $19.79 each in early trading Aug. 2, mainly on future deal hopes.

Time Warner Cable stock also rose after releasing results on Aug. 1, but again, not because of better-than-expected results.

TWC shares were up 3.2% on Aug. 1, the day it missed practically every operational target for the second quarter. Basic-video losses at 189,000 topped last year’s mark of 169,000 and were above analysts’ consensus estimates of a decline of 175,000. Most troubling to some, however, was the fall off in high-speed data customer additions. TWC added just 21,000 customers in the period, less than half the 59,000 added in the second quarter of 2012 and well below consensus of 55,000 high-speed data additions.

The No. 2 MSO faced tough comparisons in the quarter — customers are still rolling off an aggressive promotional offering from last year, and the company is switching its focus to higher-margin customers. Those efforts are beginning to bear fruit — chief operating officer Rob Marcus said recurring revenue per newly connected customers was up in the high-single digits during the quarter. But he stressed the new initiatives have only been in place for about six months and said any meaningful impact on financial results probably wouldn’t occur until the fourth quarter.

Some analysts saw TWC’s sluggishness as good news in that it could fuel a potential Charter Communications deal. Charter had approached TWC in June about M&A possibilities, but was rebuffed by the larger MSO.

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