Recent comments from Comcast (CMCSA)t about the emerging strength of high speed fiber products being sold by Verizon (VZ) and AT&T (T) has pushed the shares of the largest US cable company down. According to Barron’s the market may "have concerns about loss of basic cable subscribers, and some worries about a more aggressive challenge from the Bells on broadband." So, a battle has broken out among research firms who cover Comcast about whether the stock is cheap. Can the telecoms take a lot of the cable broadband and video customers or not?
One cable company that is almost certainly going to suffer a great deal more than Comcast is Charter (CHTR). The company’s huge debt load gives it very little capital to upgrade its own systems to keep the telecom and satellite TV companies at bay. It balance sheet weakness make it unusually vulnerable against an operation like AT&T which has almost endless access to cable, and can bundle cellular service with cable, home phone, and broadband offerings.
Concerns about Charter show in the stock. It is off 6% to $2.68. And, if numbers show that Verizon and AT&T are picking up hundreds of thousands of new broadband customers per quarter, that price is likely to drop a great deal more.
Charter’s operating income in the last quarter was $200 million. But, the company has well over $19 billion in debt. That does not leave much to dry powder.
Douglas A. McIntyre