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Liberty Global plc Message Board

  • paarb paarb Oct 16, 2006 1:26 PM Flag

    Strong JCOM numbers bullish for LBTYA

    Tokyo, Japan � Jupiter Telecommunications Co., Ltd. (J:COM; JASDAQ: 4817), the largest multiple system operator (MSO) in Japan based on the number of customers served, has announced that the total subscribing households as of September 30, 2006 served by J:COM�s 25 managed franchises reached 2.25 million* 1 , up 12.7% since September 30, 2005. The increase is attributed to growth of the subscribing households in existing service areas and the addition of newly consolidated franchises. Combined revenue generating units (RGUs) for J:COM TV, J:COM NET and J:COM PHONE reached over 3.96 million* 1 overall, up 529,100 units or 15.4% from the year earlier. The bundle ratio (the average number of services received per subscribing household) rose to 1.76 from 1.72 the year earlier. Details follow in the table below:
    * 1 Excluding the number of the subscribing households for Cable West Inc.
    For reference, subscriber information for Cable West Inc. that became a subsidiary at the end of September 2006 is provided in a separate table because it is preliminary and subject to adjustment until we have completed our review of such information and determined that it is presented in accordance with our policies.Year-On-Year Subscribing Household Comparisons: (Rounded to the nearest hundred)

    Revenue Generating Units Total
    J:COM TV J:COM NET J:COM PHONE RGU Total Households
    As of September 30, 2006 1,864,700 992,600 1,104,300 3,961,600 2,250,000
    Digital: 878,300
    As of September 30, 2005 1,684,900 837,700 909,900 3,432,500 1,996,100
    Net year-on-year increase 179,800 154,900 194,400 529,100 253,900
    Net increase as percentage 10.7% 18.5% 21.4% 15.4% 12.7%

    Note: The table above references subscribing household totals for companies managed by J:COM.

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    • Cable is also winning back customers who defected to satellite services by improving its core television product. In recent years cable operators have started offering TiVo-like recorders built into their set-top boxes, and cool new features like "start over" from Time Warner Cable, which lets customers rewind to the start of any show as long as they've tuned in before the program ends. (Time Warner Cable, like Fortune and, is a unit of media conglomerate Time Warner.)

      Not that the telcos are giving up. Verizon and AT&T both have announced ambitious plans to replace their traditional networks with fiber to deliver even faster Internet access and high-definition television services. "Telecom competition is real, and it is coming," says UBS analyst Aryeh Bourkoff. "But our view is that the 2006-to-2008 time frame is cable's window."

      Indeed, the big cable operators are healthier than they've ever been. And while many of the stocks have been climbing, if you look carefully, there are still some attractive opportunities. Here's a rundown.

      Lewis J. Altfest, president of New York City investment advisory firm Altfest & Co., is recommending Comcast (Charts) (CMCSA, $38) to his clients, despite the fact that the shares have jumped 46 percent since their March low. Comcast took longer than most of its peers to build the advanced systems needed to deliver calls. As a result, only one million of its 22 million cable subscribers buy their dial tone from Comcast.

      Now the company is ramping up marketing of the service, and Craig Moffett of Bernstein Research believes Comcast could provide more than 25 percent of its customers with phone service by 2010. Today Comcast trades at about nine times estimated 2006 cash flow - well below its peak of about 21 times cash flow.

      Applying today's low multiple to her 2007 cash flow estimates for the company, prominent media analyst Jessica Reif Cohen of Merrill Lynch in early October raised her price target on Comcast stock to $45 a share.

      Liberty Global
      Joe Wolf, co-manager of the RS Value Fund, likes Liberty Global (Charts) (LBTYA, $26), in which cable pioneer John Malone is the largest individual shareholder. Wolf likes Liberty's geographic reach - its 13 million subscribers are in markets as diverse as Switzerland, Chile and Japan. And he says that Liberty is still at the very early stages of selling add-on services to its international customers.

      But what Wolf, whose firm owns eight million shares of the stock, really likes is the cable operator's return on invested capital: Much of Liberty Global's cable plant has already been upgraded, so its capital spending goes mostly to high-return incremental expenditures, like set-top boxes for new digital customers. "We've been involved with this company for many years, and this is as attractive a risk-reward story as it was when we bought our first share," he says.

      Charter Communications
      While the industry is dominated by large operators, there are some intriguing smaller players, including St. Louis-based Charter Communications (Charts) (CHTR, $1.68), which counts Microsoft co-founder Paul Allen as its largest individual shareholder.

      The stock has been in free fall almost since its 1999 public offering (notice the sub-$2 share price) as the ambitious operator issued mounds of debt to fund its expansion plans; its market value is just over $700 million.

      Because of its debt payments, Charter is not profitable, nor does it generate free cash. But Charter recently posted better-than-expected revenue in the second quarter, and the company says that it is getting ready to push its high-speed data and phone services to its 5.9 million cable customers in earnest. The company's bonds have been trading at much higher levels, notes UBS analyst Bourkoff, who believes that the stock could follow suit.

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