That's one of the summary conclusions Sanford C. Bernstein & Co. Inc. made in its attempt to size up the situation before the MSOs it covers -- Comcast Corp. (Nasdaq: CMCSA, CMCSK), Cablevision Systems Corp. (NYSE: CVC), and Time Warner Cable Inc. (NYSE: TWC) -- issue their fourth-quarter results.
Table 1: Great (or at least not horrible) Expectations*
|MSO||Revenues||Earnings per share||Basic sub growth/loss||High-speed data net adds||VoIP net adds|
|Time Warner Cable||$4.396B||$0.32||-27,000||153,000||164,000|
|* Sanford Bernstein estimates for Q4 2008|
Bernstein analyst Craig Moffett expects those numbers to "provide solid evidence of that macroeconomic resilience." MSOs' recurring, non-usage-based revenues could "prove relatively more resilient than the broader economy," he thinks.
Moffett also believes MSOs will see more rapid gains in broadband and slower capital spending, which will result in higher free cash flow.
The report points out that the majority of cable ARPU (average revenue per user) growth is tied to increased penetration of high-speed data and VoIP services, which remain areas of relative strength for the U.S. cable industry.
The rate of cable VoIP growth is expected to slow, and could worsen if more consumers chuck wired phones in favor of going wireless. In Moffett's view, the cable voice "wild card" is in serving small- and medium-sized businesses -- already an area of emphasis for Comcast, Time Warner, and Cablevision.
"Here, macro-economic weakness -- which is likely to sap the telcos of growth in what has recently been a strong growth segment -- is a nonissue, as the cable operators as newcomers are in the very first inning of a share game," Moffett says.
Of course, cable isn't immune to the economy. One area at risk is video, where Moffett notes customers might tighten their wallets and opt to drop premium services from HBO, Showtime, and Starz. They might also be slow to adopt advanced services such as high-definition television and digital video recorders.
Comcast, TWC, and Cablevision lost a collective 198,000 basic-video subscribers in the third quarter of 2008, and Moffett does not expect that trio, as a whole, to have reversed course in the fourth quarter, as home foreclosures increased and new home construction declined.
— Jeff Baumgartner, Site Editor, Cable Digital News