VOOM per-subscriber equipment as low as $249? (1 Viewer)

Sean Mota

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By Kathleen Anderson and Georg Szalai

NEW YORK (Hollywood Reporter) - As earnings season gets into full swing for cable operators this week, industry and Wall Street observers will have their eyes and ears set mainly on the industry's 2004 outlook.

While fourth-quarter revenue and cash-flow figures should show solid gains for most industry players, analysts will listen closely for more details on financial and deal expectations, as well as updates on aggressive new service rollouts planned this year.

Also front and center will be the state of competition with satellite TV firms, particularly DirecTV, which is now controlled by Rupert Murdoch's News Corp. The company's parent, Hughes Electronics, is set to report its own set of quarterly financials today, and cable operators may well react to the firm's first conference call under new leadership.

High-speed Internet service will once again be the key growth driver in cable firms' fourth-quarter figures, analysts predict. However, with that product looking to have reached its growth peak, sector watchers will closely look for indications of how much more growth may be left in that segment this year.

"We are looking for strong upticks in weekly additions for Comcast, while flat for Cox and Mediacom and modestly lower at Cablevision as it achieves an estimated industry-high 24% data penetration," Merrill Lynch analyst Jessica Reif Cohen predicts for fourth-quarter broadband performance.

She added that the market is still in expansion mode, "fed by a pool of an estimated 45 million narrowband users" still out there as of the end of last year. However, cable operators may focus more on multiple pricing options and win-back campaigns as competition with telephone firms' DSL services continues to be hot, Reif Cohen said.

Cable giant Comcast Corp., which opens the sector earnings parade Wednesday, could see growth trends similar to those in the third quarter, but high-speed Internet net subscriber additions could come in slightly below the 473,000 seen in the third quarter, analysts predict.

However, cash-flow growth "should be notably higher (48% vs. 26% in the third quarter) due to the weakness in fourth-quarter 2002 profitability due to the closing of the AT&T Broadband acquisition," Credit Suisse First Boston analyst Lara Warner said.

Other cable blue-chippers, like Cox Communications, are also expected to bring in solid results for the latest period, while Charter Communications, Cablevision Systems and smaller industry players could see mixed figures, analysts said.

Cablevision could see "positive" momentum in its shares during the coming weeks and months as the company's accounting review and the planned spinoff of its Voom satellite TV business could lift the stock to new highs, Reif Cohen said.

Investors also will closely listen for any first data points for Voom amid reports that the company is considering cutting per-suscriber equipment costs from $750 to as low as $249. Prudential Equity Group analyst Kathy Styponias said such a move would suggest "lackluster demand for the service resulting from programming voids (missing HBO and ESPN)" and other issues.

Focusing on the sector outlook, investors and analysts will look for management teams' expectations for further consolidation amid heated satellite competition and rising programming costs. Deal activity could be "centered around Adelphia as it emerges from bankruptcy" later this year, Reif Cohen said.

Also, analysts have said that Cablevision could be looking at offers as the Voom spinoff could make a takeover by Time Warner Cable or others easier.

Growth potential of high-definition TV services also will be a focus for analysts as cable operators are looking to keep pace with aggressive marketing pushes from all satellite operators. Preliminary results at Comcast and Cox show HD as a potential win-back tool, Reif Cohen said.

Analysts are saying it could be a big year for the launch of the service as consumers discover it and prices for HD television sets decrease.

Similarly, UBS analyst Aryeh Bourkoff said investors should keep a close eye on growth opportunities from voice-over-Internet protocol rollouts, which TW Cable and others have said they will push aggressively this year.

"The operators will need to articulate their respective bundled product offerings as the Bell and satellite partnerships ready their competitive bundle strategy slated to begin in earnest in March," he said.

Overall, Wall Street expects most cable players to reiterate their expectation to be free-cash-flow-positive for the year, with the rest to follow suit next year.

But even with bullish outlooks, some predict that sector stocks have little growth ahead in the near term. "We continue to fear that near-term competitive 'noises' will pressure the cable group's stock price performance in 2004 despite our long-term bullish stance premised on technological superiority" as cable has the "fatter" pipe, said Richard Greenfield, managing director at Fulcrum Global Partners.
 

Dan Berndt

SatelliteGuys Pro
Dec 2, 2003
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Personally I think anyone who expects a refund, unless you return your equipment, is going to be disappointed. But that's just my philosophy, "don't expect anything and you won't get disappointed." I think you should be willing to live with the price you paid or plan to return your equipment when the money back deadline arrives.
 

Geno

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Nov 28, 2003
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I agree with Dan. Although it burns to have it happen, I'm writing the $750 off to as an effort to further the cause. If they gave refunds to all 5000+ of us, it would just push VOOM closer to failure. Hell I spent the $750 so long ago I don't miss it. I'm pro Voom so they can keep my money. Just give me the 39HDs!!!!!
 

Alan Gordon

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Oct 20, 2003
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Dawson, GA
VewDew said:
My question is if they drop the prices of the equipment, are those of us who spent the $800+ going to get a refund?

I figure the reason why it was $750 at first was because of the months of free programming. Now that the free programming is winding down, the price of the equipment will go down. You don't get programming for free unless you put up an antenna! ;)


~Alan
 

rtt2

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Sep 8, 2003
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Do you think they would count the free PPV boxing as a cost that you got free and apply that toward any reimbursement? I can see them now saying you got all these months of all the channels so that $100 per month then a $40 boxing match (I am guessing on the PPV price) so in the end it equals out to...
 

Sean Mota

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Sep 8, 2003
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New York City
rtt2 said:
Do you think they would count the free PPV boxing as a cost that you got free and apply that toward any reimbursement? I can see them now saying you got all these months of all the channels so that $100 per month then a $40 boxing match (I am guessing on the PPV price) so in the end it equals out to...

I would agree with $40 boxing match to an extend. But given the choice I would have not spent $40 for a boxing match on PPV. Also, regarding the $100/mth, it would have been fine if VOOM had provided all 39HD channels but that's not the case. So the math does not add up. What will be the best way to do this? I do not know.
 

dlsnyder

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Sep 8, 2003
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Moreno Valley, CA
Focusing on the sector outlook, investors and analysts will look for management teams' expectations for further consolidation amid heated satellite competition and rising programming costs. Deal activity could be "centered around Adelphia as it emerges from bankruptcy" later this year, Reif Cohen said.

We can only hope! Adelphia is one of the worst offenders out there for baiting customers with a "low introductory rate" then sticking them with a 60% rate increase or better after three months. Small wonder that in my neighborhood there is at least 50% DBS penetration. I have yet to see a VOOM dish though. :(
 

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