Cable Operators Defy Pessimists with Robust Results Despite Industry Headwinds

Strategic Insights -

Cable operators such as Comcast and Time Warner Cable have bucked expectations with strong quarterly revenue growth, driven in part by stable pricing for broadband internet. Despite concerns about the impact of emerging competition from telecom companies, cable operators have room to breathe, with Time Warner Cable's 242,000 new internet telephony customers and the willingness of Cox and Cablevision's controlling families to go private hinting at their growth potential. However, investors remain cautious about cable valuations, citing the looming threat of telco competition and the potential for prices to come under pressure.

Key Takeaways:

  • Comcast and Time Warner Cable both reported double-digit revenue growth in the last quarter, defying pessimistic forecasts.
  • Stable pricing for broadband internet has been a key driver of growth for cable operators in recent years.
  • Time Warner Cable signed up 242,000 internet telephony customers in the last quarter, demonstrating the growth potential of this product.
  • The controlling families of Cox and Cablevision have expressed interest in taking their companies private, indicating confidence in their growth prospects.
  • Telecom companies have ambitious plans to offer a bundle of video, telephony, and broadband, which could put pressure on cable prices and threaten their growth.
  • Investors are factoring in significant pain for the cable industry, but may be overestimating the impact of telco competition.
  • Cable operators have time to build a lead on their rivals in the telco space, which could allow them to defend their market share more effectively.

Statistics:

  • Comcast's valuation is at a 10-year low compared with the broader stock market, according to Sanford Bernstein.
  • Time Warner Cable signed up 242,000 internet telephony customers in the last quarter.
  • Cable operators such as Comcast and Time Warner Cable have reported double-digit revenue growth in the last quarter.

Sources:

  • Harbour, G. (n.d.). Pity the cable operators. http://www.telegraph.co.uk/finance/newsbysector/mediatechnology/telecoms/8369116/Pity-the-cable-operators.html
  • Sanford Bernstein (n.d.). Report: Telecoms Giants Poised to Disrupt US Cable Industry.