Cable focuses on Internet, satellite TV grows
U.S. cable television companies wooed home Internet users from rivals in the second quarter, helping offset a trend that has seen their television customers flee to top satellite player DirecTV Group(DTV.O).
Time Warner Cable Inc (TWC.N) and Cablevision Systems Corp (CVC.N) reported on Thursday, like Comcast Corp (CMCSA.O) last week, that they successfully added Internet subscribers in what is now a key focus for companies that were originally built on the back of cable TV programming.
Time Warner Cable Chief Executive Glenn Britt said on a conference call that successfully marketing Internet access is as important, if not more so, as selling bundles of TV shows.
"Broadband is still growing nicely and becoming a more important part of people's every day lives and we're seeing tangible evidence the consumers are willing to pay more for the speed and reliability," Britt said.
Time Warner Cable added 85,000 broadband subscribers during the quarter, while Cablevision added 27,000. Comcast, the No.1 U.S. cable company added 118,000.
With rising programming costs in their video businesses, cable companies see broadband, with its relatively fixed costs, as a more profitable business to grow.
Cablevision for instance said it plans to offer more video applications to customers who use Internet-enabled devices at home and free Wi-Fi connections to its customers around major spots in its local area.
"Broadband is increasingly important for cable companies," said Collins Stewart analyst Thomas Eagan. "It has become the strategic focus, with TV following."
The top two cable companies both lost video subscribers during the quarter: Comcast lost 265,000, while Time Warner Cable lost 111,000. Cablevision which has been competing aggressively with Verizon Communications (VZ.N) in its New York area managed to buck that trend in the quarter by adding 2,900.
DirecTV Group added 100,000 U.S. subscribers, beating the forecasts of most analysts, some of which had worried the company might lose customers due to the slow economy and competition from cable and newcomers to the pay-TV market like Verizon's FiOS and AT&T Inc's U-Verse.
"For years, questions have swirled about DirecTV's ability to sustain subscriber growth in the U.S. Not to worry. Today's results suggest that subscriber growth is just fine, thank you," said Bernstein Research analyst Craig Moffett in a client note.
Both Time Warner Cable and Cablevision posted financial results ahead or in line with expectations.
Time Warner Cable's net income rose to 95 cents a share, beating average Wall Street forecasts for 93 cents. While its revenue rose 5.8 percent to $4.73 billion, ahead of average forecasts of $4.68 billion, according to Thomson Reuters I/B/E/S.
"Overall they struck a good balance between customer and financial growth," said Eagan of Collins Stewart.
Cablevision's net income was 20 cents a share sharply missing an average Wall Street forecast of 40 cents, mainly due to the one-time loss on extinguishment of debt. Bernstein Research said excluding that loss, Cablevision's profit was in line with consensus.
Revenue rose 5.8 percent to $1.802 billion ahead a forecast of $1.769 billion, according to Thomson Reuters I/B/E/S.
Bernstein's Moffett said Cablevision's second quarter had shown "almost no discernible weak points".
DirecTV, which also added 415,000 subscribers in Latin America, posted an adjusted profit of 60 cents a share, in line with expectations. Its revenue rose 12 percent to $5.85 billion.
Shares in Time Warner Cable and Cablevision have risen more than 40 percent and 30 percent respectively since the start of the year as investors have bet that cable will be a leader in future communications thanks to its broadband strength.
DirecTV shares have risen by 16 percent in that period.