Cable's Financials: What the Mergers Mean

By Monta Monaco Hernon - With the completion of some major mergers and acquisitions in the last quarter, how are cable's financials looking?

Cable's Financials: What the Mergers Mean
Cable's Financials: What the Mergers Mean

With the completion of some major mergers and acquisitions in the last quarter, how are cable's financials looking? While it's still early days, the initial numbers look promising.

In June, Altice (Euronext:ATC) completed its acquisition of Cablevision and Suddenlink, to form Alice USA. Combined, the company is the fourth-largest cable operator in the United States, serving more than 4.6 million Optimum and Suddenlink customers across 20 states.

Suddenlink had a growth in revenue for the quarter of 5.7% year-over-year on a constant currency basis, excluding a big pay-per-view event in the second quarter of 2015. The operator had a net loss of 8,000 unique residential customer relationships, which was an improvement over the year-ago second quarter.

Optimum experienced 2% underlying revenue growth year-over-year on a constant currency basis. The company had 19,000 net unique customer relationship additions, which was the strongest operational performance in a second quarter since 2012.

In May, Charter Communications (NASDAQ:CHTR) closed its transaction with Time Warner Cable and Bright House Networks. The combined company reaches nearly 49 million homes and businesses and has more than 25 million residential and business customers. The standardization of business practices and processes, including the IT services infrastructure, is expected to be completed over two plus years, while the standardization of pricing and packaging should happen across regions over the next year.

Charter is undergoing a process of in-sourcing, which will take several years and involve hiring 20,000 people. The first step was building a Spanish-language call center in McAllen, TX, with 600 seats.

"With a more local work force, we'll perform higher quality transactions with customers, which we expect will improve customer satisfaction, reduce transactions and costs, and extend average customer lives, thereby growing our customer base and cash flow efficiently," said Thomas Rutledge, Charter chairman and CEO.

Specifically, Charter will begin rebranding Time Warner and Bright House and launch Spectrum pricing and packaging in key markets, totaling more than 40% of acquired passings. The remainder will occur the first half of 2017. The all-digital project at Time Warner and Bright House will use the Charter all-digital strategy, with fully functioning two-way set-top boxes with VOD and advanced guide functionality on every TV outlet. This project will begin in 2017 and is expected to finish by 2018.

Spectrum Guide will be available in most legacy Charter markets by the end of the year. It will be in TWC's larger markets by the middle of 2017 and in other markets through the year, and likely continuing into 2018. Rutledge said Charter is running a WiFi network in public spaces throughout the country and on a widely distributed indoor terrestrial wireless network.

"Combined MVNO opportunities and other wireless building blocks should allow us to create products and services with a high value proposition. Over time, we'll have more to discuss on the subject," Rutledge said.

Comcast's (NASDAQ:CMCSA) quarter was marked by the addition of 115,000 customer relationships, which is triple the number added in the second quarter of 2015. In video, the company lost 4,000 customers, which is the best second quarter result in more than 10 years. Chairman and CEO Brian Roberts noted that on a trailing 12-month basis, Comcast added 90,000 video customers, which he called a "remarkable improvement in the face of significant competitive and technological change."

As for X1, the cloud-based video platform is now 40% penetrated, with 8 million voice remotes deployed. About 800,000 new voice remotes are being rolled out each month, and more than 200 million commands are generated per month. Comcast expects to have 50% penetration of X1 by the end of the year. About 885,000 boxes were put out during the second quarter.

Some 220,000 high-speed Internet customers were added, which is the best second quarter result in eight years, driven by customer retention. The XB6 wireless gateway will be out toward the end of the year, or early next year.

Cable One (NYSE:CABO) had its first anniversary results as an independent company. First year adjusted EBITDA was up $36 million or 12%. Video subscribers were down 15% in the last 12 months. "There is very little cash flow and little or no free cash flow left in the linear video business model for most small operators," said Cable ONE CEO Tom Might.

Might added that the company has two products with good growth and good margins, residential Internet service and business services. Business services relationships increased 10.9% for the 12 months ended June 30. Business comprises 12% of total revenues for the second quarter of 2016. Residential data revenues increased $13.6 million or 18.7% due to a rate increase in the fourth quarter as well as an increase in residential data customers of 1.8%, among other things.

(Transcripts from seekingalpha.com)

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