2Q Preview: Rural Systems Expected to Experience Less Basic Bloodletting

While 2Q has become synonymous with seasonality in the cable industry, there may be a little sunshine in this latest round of operating results. Analysts are expecting 2Q basic sub losses to continue, but they anticipate fewer losses than 2Q ’04. The biggest ray of light may come from cable operators with rural systems, such as Mediacom and Charter. With DBS’ local-into-local rollouts near completion, the rural ops are expected to make somewhat of a comeback. Oppenheimer estimates 10K basic sub losses for Mediacom when it reports Wed-worse than the 1Q’05 3K sub loss, but far better than the 39K subs it lost in 2Q a year ago. "2Q’s seasonal weakness is moderate vs 2Q last year, driven by fewer losses for the rural MSOs … and the success of bundling," Oppenheimer’s Thomas Eagan said in a research note. Banc of America’s Douglas Shapiro has a similar view, pegging Mediacom’s basic losses at about 15K. "Mediacom should show more evidence that the DBS pressure has stabilized," he told clients. Overall, Oppenheimer expects the industry to net about 148K basic sub losses in 2Q vs 311K a year earlier. Wall St also will be keeping a close eye on HSD adds after seeing the RBOCs post lower-than-expected DSL adds. Verizon, SBC and BellSouth added a collective 762K DSL adds, down 33% from the more than 1mln they added in 1Q (this should help alleviate some of the analyst questions on earning calls about the impact of DSL discounts). Cable’s expected to retain 46%-49% of the Q’s broadband net adds. Wall St will also monitor what’s going on with VoIP, though it expects to see the most action in the 2nd half of the year. Comcast and Charter report tomorrow; Mediacom and Time Warner issue results Wed; and Cablevision reports Aug 9. Insight’s Numbers: The soon-to-be private Insight was the 1st MSO at bat, reporting Fri that its loss had narrowed to $728K (1 cent/share) from $7.5mln a year ago. That’s a penny better than analysts had predicted. Revenue was up 11% to $250.6mln. Insight lost 14,200 basic subs in 2Q vs 15,500 in 2Q’04. It added 1,800 digital customers and 23,500 HSD subs.