Numbers Show Cable Turnaround in 97


New York -- Cable stocks' recovery in 1997 was built
on solid financial performance by those companies.

The latest review of publicly owned media companies by
Veronis Suhler & Associates Inc., released last week, bore that out. MSOs'
revenue grew by a double-digit level -- 14.2 percent -- for the third straight year,
reaching $24.9 billion.

Revenue growth actually slowed in 1997, after rising by
20.4 percent in 1995 and by 18.9 percent in 1996. But operating income rose by 21.3
percent, to about $3.7 billion from $3 billion, versus a mere 0.4 percent gain in 1996 and
a 5.4 percent rise in 1995.

The operating-income turnaround was a result of two
developments: system-capacity upgrades, which increased revenue per subscriber by adding
new programming; and clustering, which held down growth in operating costs, according to
the report.

MSOs' operating-income margin, or percentage of
revenue, also ticked up nine-tenths of a point, to 14.7 percent, after declining during
the three years before that.

Operating cash flow -- a closely watched barometer of
heavily leveraged companies, like cable operators, because it excludes depreciation and
amortization -- rose 21.2 percent, to $10.5 billion, for the cable group. That was the
third straight year of double-digit improvement.

MSOs' cash-flow margin rose to 42.2 percent from 39.8
percent in 1996, stemming a decline since the 44.9 percent level of 1993.

Operating-cash-flow return on assets -- reflecting cash
flow as a percentage of the average asset value of 1997 and 1996 -- rose to 11.6 percent
from 11 percent the year before.

This was the first growth in that statistic in three years,
reflecting "the payoff in earnings performance from the investments made by
cable-system operators in 1995 and 1996," Veronis, Suhler said. The 1997 return was
far below the 13.9 percent level of 1994, though.

Tracked over five years, cable operators' asset growth
rose to a compound annual rate of 22.8 percent, up from 20.2 percent after 1996, and
operating cash flow grew at an 11.3 percent compound rate, up from 8.6 percent a year

The MSOs' revenue-growth rate climbed to 16.7 percent
from 1994 through 1997, from 14.1 percent in the 1993-through-1996 period.

Competitors made gains in 1997, too. Direct-broadcast
satellite providers added 2.1 million subscribers, three times cable's additions.
Revenue at the publicly reported DBS companies rose 83 percent, to $2.8 billion from $1.5

Wireless cable firms added 200,000 subscribers, for a total
of 1.2 million, and their revenue rose 25 percent, to $249 million from $198 million.

At cable networks, prosperity continued to reign. Veronis,
Suhler tracked 14 public companies that operate those networks. Their revenue rose 12
percent in 1997, to $6.1 billion -- the fourth straight year of double-digit gains.

Subtracting Gaylord Entertainment Cos. -- which sold The
Nashville Network and Country Music Television to CBS Corp. -- the rise was 13.9 percent.

The companies' operating-income margin ticked up to
22.1 percent, its highest level in five years. Their operating-cash-flow margin declined
by three-tenths of a point, to 26 percent.

For the second straight year, Comcast Corp. topped Veronis,
Suhler's list of the top 50 communications-industry firms ranked by
operating-cash-flow margin (47.6 percent, down from 49.4 percent in 1996). U S West (42
percent) moved ahead of Cox Communications Inc. (37.9 percent) for second place.

Tele-Communications Inc. (36.4 percent) placed fourth on
that list, up from eighth after 1996, when its cash-flow margin was 30.4 percent.