Cable TV chiefs wear brave face looking at 2003
Thu Dec 5, 4:14 PM ET
By Bob Tourtellotte
ANAHEIM, Calif. (Reuters) - The leaders of several major U.S. cable TV operators Thursday put a brave face on a difficult 2002 and offered a brighter outlook for next year as investments in new digital services begin to boost revenues and help reduce subscriber defections.
Speaking at the Anaheim, California industry gathering, Broadband Plus, The New Western Show, chief executives ranging from Brian Roberts of No. 1 provider Comcast Corp. to Rocco Commisso of relatively small Mediacom Communications Inc. blamed low stock prices on many issues outside their control, and said their businesses remained fundamentally sound throughout 2002.
A few even offered predictions of a rebound in their lagging stock prices with Michael Willner, CEO of Insight Communications Co. Inc., seeing "a very healthy growth rate, maybe in excess of 30 percent."
Even Carl Vogel of embattled Charter Communications Inc. said that if the industry continues to execute their business plans on target, which requires deploying digital cable TV systems to better compete with satellite TV, then "our stocks will do well."
Charter is one of the cable companies hardest hit in 2002, facing a criminal probe of its accounting practices and satellite services eroding their subscriber base. The company has said it may sell non-core assets and cut jobs.
Cable companies have been beset by the loss of subscribers to competitive systems from satellite TV providers and high levels of debt after companies spent heavily on acquisitions and digital system upgrades to compete with satellite.
DEBT STILL A DRAG
The high debt, in turn, has hampered the companies' ability to generate free cash flow and earnings per share, which has further spooked investors.
The travails of Adelphia Communications Corp., which filed for bankruptcy earlier this year with its founder John Rigas carted off in handcuffs amid charges of securities fraud, have exacerbated that fear.
But the cable chiefs said their buildout of new digital infrastructure to support services like video-on-demand, high-speed Internet access and two-way interactivity is nearly complete, meaning the higher revenues that digital subscribers bring should help boost their revenues and their cash flow.
"Fundamentally, nothing has really changed in the industry, and we are getting closer to the free cash flow that Wall Street wants," said Mediacomm's Commisso.
Insight's Willner said his company now has digital systems in 35 percent of its subscriber base, and he expects that number to increase to more than 50 percent and possibly 60 or 70 percent in the year ahead.
While Wall Street has worried about the loss of subscribers to satellite systems from EchoStar Communications Corp. and DirecTV, a unit of Hughes Electronics Corp., the cable operators said the new digital services like video-on-demand (VOD) will put them in a better position to compete because satellite TV cannot provide all the digital services that cable can.
Moreover, the cable operators are able to charge more for the new digital services and boost revenue per subscriber. For years, Wall Street has valued cable companies on subscriber growth, and the chief executives say the Wall Street model needs to change to focus on growth in revenues per subscriber.
Reuters/Variety
Brighter outlook for next year..?
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