Moody’s bullish on cable television


Broadcast television may be suffering in the advertising recession, but Moody’s Investors Service says cable MSOs will continue to increase revenues, EBITDA and free cash flow this year. The big driver is the “triple-play” package that each company is pitching to consumers.

“Even cash-strapped consumers are likely to find room in their budgets for triple-play, which costs considerably less than paying three separate providers for phone, Internet and cable-TV service,” said Moody’s Senior Vice President Russell Solomon.

As the phone companies increase their market presence, the cable industry will likely introduce more-aggressive promotional offerings, making the value proposition afforded by triple-play increasingly compelling, in Moody’s view.

According to the ratings agency, the cable-TV industry’s average triple-play-equivalent penetration rate — the average penetration rate for each of the three triple-play products — is expected to reach about 34% by the end of 2009, up from 32.7% in 2008.

That said, revenues are expected to rise slower than in years past because of heightened competition, as well as the industry’s already large subscriber base, which makes it harder to expand, said Moody’s Vice President Neil Begley.

Overall, key credit metrics should remain stable or improve. Most cable operators will maintain good liquidity and show flat-to-declining leverage metrics and higher coverage trends, said Moody’s. In addition, capital spending is likely to remain flat, with M&A and
shareholder-friendly activities largely absent.

Longer term, “the competitive threat posed by the phone companies to the cable industry’s dominance of triple-play remains a major concern,” said Begley. But over the next year or so, he thinks cable companies are likely to take more share from the phone companies than they will lose.

RBR/TVBR observation: Sure is nice to have those multiple revenue streams. No wonder TV stations are so keen on developing their own, including retrans payments from the MSOs.