The knock on the cable TV companies goes something like this: New, well-funded competition from the telcos; slower-than-expected broadband adoption; dwindling basic cable subs, and a burst housing bubble spell serious trouble. Hence cable shares are down double-digits since October.
But Bernstein analyst Craig Moffett thinks Comcast (CMSCA) is going to be fine, anyway, and beat the drum for the company during a boosterish conference call. His key points:
- The telcos (AT&T and Verizon) will only have built out fibre in half of Comcast’s footprint by 2011
- Satellite TV ads are decelerating, and Comcast has plenty of capacity to match their HD offerings without rebuilding their systems.
- “Cable and the telcos can happily coexist in the market without catastrophic price wars”
- Capital spending will decrease and free cash flow will accelerate in 2008.
- Don’t fret too much about losing low-margin basic subscribers; pay more attention to higher-end, higher-margin customers.
- Digital transition in 2009 means some of the remaining 14m over-the-air homes will flock to pay-TV providers, including cable.
- Cable’s share of the advertising business jumps, especially in 2008 when the Olympics and elections create shortages on local broadcast TV. Per-sub ad revenue grows from $6.66 in ’07 to $7.79 in ’08.
One item we didn’t hear a word about: Proposed FCC regulations that would cap cable ownership at 30% — a provision aimed squarely at Comcast, which is right at that proposed limit.
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