FCC, Verizon Results Add To Woes of Cable Stocks

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A down market, the specter of heightened government scrutiny and discouraging high-speed Internet subscriber results from one of its key competitors put a damper on cable stocks Monday.

Most cable stocks were down 3-4% on Monday – Charter Communications took the biggest hit, down 13 cents, or 11.4%, to $1.01.

But the entire sector felt the brunt of a down market – the Dow Jones Industrial Average dipped 239.61 points Monday, fueled primarily by concerns about the financial sector.

None of the six publicly traded cable operator stocks escaped unscathed. Time Warner Inc. dipped 3.1% (46 cents each) to $14.16 per share; Time Warner Cable was down 80 cents each (3.04%) to $25.54; Comcast dipped 72 cents each (3.67%) to $18.90 per share; Cablevision Systems fell 84 cents each (3.91%) to $20.65; and Mediacom Communications dropped 24 cents each (4.12%) to $5.58 per share.

Collins Stewart cable analyst Tom Eagan said that several factors contributed to the decline in the stocks, including the overall market malaise. But he said that concerns over possible increased FCC scrutiny stemming from reports that the federal agency will likely

punish Comcast

for blocking Internet traffic for some customers, and poor high-speed data

growth numbers

from Verizon could have played an even bigger role.

The FCC will hold a vote on the matter on Friday, but Comcast is expected to appeal any negative decision.

“It sounds as though this could start a protracted legal battle over what the rights of the FCC are,” Eagan said. “Friday it sounds as though we’ll hear the FCC specifically outline what cable operators can and cannot do to manage their networks. Then we’ll hear the response from Comcast and the others.”

Verizon’s weak second quarter high-speed data adds – it added 187,000 FiOS Internet customers but lost 133,000 DSL subscribers in the quarter – also played a role in the decline of cable shares. AT&T recently

posted

poor broadband growth in the quarter that ended in June, as well: a mere 46,000 net adds.

“The numbers clearly were disappointing and it may point to overall softness in the sector,” Eagan said. He added that the true impact on cable will begin to be revealed on Wednesday, when Comcast is expected to release its second quarter results.

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