US cable sector headed for 18 months of slowing growth | Major Businesses | Business
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Faced with ongoing streaming adoption by consumers, the cable sector in the US should see slower growth going forward; however, Comcast, Charter and the rest should see strong and steady cash flow margins at an impressive 39% over the next 12 to 18 months.

comcast 3 nov 2018That’s according to credit-rating giant Moody’s, whose Investors Service has predicted that cash-flow growth for cable MSOs will slow to about 4.2% now that mega-merger frenzy appears to have slowed down. In 2017, when Charter swallowed Time Warner Cable, cash-flow improved to about 5.2% thanks to billions of dollars in cost-saving opportunities via synergies.

“While our forecast does not have any material assumptions for acquisition synergies, we believe further consolidation could provide new support to our EBITDA forecasts,” Moody’s vice president and senior credit officer Jason Cuomo said, in a note to investors.

Comcast’s $40 billion purchase of Sky won’t impact US operating results, he added, although Sky should be a positive addition for Comcast’s overall operating metrics, giving it diversified strength; Sky’s balance sheet is healthier than that of most U.S. cable operators.

Unsurprisingly, Moody’s does expect broadband subscriptions to continue to grow, even as cable lost 2% of its video subscribers in the past year. Broadband customers rose 4.6% in the same period, meaning that data subscribers grew at around 3.1 times the number of video customers lost in Q2.

Granted, that’s a fall-off from 2017 and represents the lowest number of additions seen in the past five years. In 2017, broadband gains were 6.2 times the video losses.

In the next year and a half, the rate will slow even more, Moody’s said, but won’t fall below twice the number of video losses. That means broadband growth in the mid-single-digits and video losses in the low-single-digits.

“Based on the current gap between the prices and profits of broadband and video, we expect lost video subs to be replaced by new broadband subs at a rate of 2 [times] or more to produce positive growth in both revenue and EBITDA,” Cuomo wrote.