Cable infrastructure boom wouldn't hurt so much

Posted by: Aaron Pressman on September 1, 2006

Cable stocks had a tough couple of weeks in the press amidst fears that the industry may have to begin a costly third wave of building out infrastructure to compete against telephone companies’ super-fast fiber optic networks. But BCA Research makes a critical point today that puts those fears in context and explains part of why the stock market shrugged off the stories. Comcast (CMCSA) and Cablevision (CVC) are up 2% over the past two weeks while Time Warner (TWX) is up 1%.

Cable companies have tremendous pricing power and have been able to raise their rates at two, three or even four times the rate of inflation for years now. BCA compared the yield on cable bonds, the industry’s ostensible cost of capital, to the rate of price increases and found that the effective real yield currently stands close to zero and has spent most of the past 10 years below 2%. With such cheap money, the Montreal firm points out, it’s not hard for the cable cos to profit from any future investments.

Post a comment

 

About

Bloomberg Businessweek’s Ben Steverman focuses on the latest moves in financial markets and emerging trends in stocks, bonds, and funds, always with an eye toward giving readers a better understanding of the sometimes confusing and often chaotic world of money. Standard & Poor’s senior index analyst Howard Silverblatt will also provide his take on companies’ finances and the markets. Voted one of the “Top 100 Finance Blogs” in 2007.

BW Mall - Sponsored Links

Buy a link now!