Media

Another Big Blow To Cable Companies

Most cable company stocks are already trading at 52-week lows. Last week, Comcast (CMCSA) reported earnings and subscriber growth that were below Wall St. expectations. And AT&T (T) came out with earnings that showed its fiber-to-the-home cable killer U-verse was growing quickly. The combination of the two pieces of news pushed cable stocks down even further.

Verizon’s (VZ) earnings are likely to confirm that telecom TV products are picking up new customers at an accelerating pace.

And, cable’s prospects had seemed so rosy at the beginning of the year, when Comcast shares hit a multi-year high. The cable "triple" play of voice, broadband, and TV had the big telecom companies by the throat. Cable was picking up telephone landline customers with its inexpensive VoIP products.

But, now its appears that the telecoms are the ones taking market share.

And, one of cable’s key advantages will disappear this week. The FCC "hoping to reduce the rising costs of cable television, is preparing to strike down thousands of contracts this week that gave individual cable companies exclusive rights to provide service to an apartment building," according to The New York Times. Those apartment building deals were part of cable’s impregnable fortress, keeping out both telecom and satellite TV products.

While the FCC deal does not throw the cable firms out of these apartments, it puts hundreds of thousands of customers at risk. And, it invites Verizon and AT&T to come in with lower priced packages that could badly hurt cable’s margins if the competition turns into a price war.

With so much at stake, there will be price cutting. And, that will send cable stocks down even more.

Douglas A. McIntyre

ALERT: 5.25% Yield Is 8x National Average (Sponsored)

Robinhood Gold just rolled out a wild 5.25% APY yield for members, a whopping 8x the national average and way better than treasuries.

Earn an eye watering amount of money while you sleep. Sign up today — click here to start earning today.

Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.