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February 13, 2007 Tuesday 14:24 PM EST
By Scott Moritz, Senior Writer
From Lexis Nexis
Investors are going to get their hands on Time Warner’s (TWX:NYSE) cable unit just as broadband fever sweeps Wall Street.
With its shares having been swapped for some of the assets of the failed Adelphia cable shop, Time Warner Cable is expected to start trading as a separate company on the New York Stock Exchange under the TWC ticker around March 1.
The move puts shares of the No. 2 cable company in investors’ hands at a time when the sector has attracted growth-hungry hunters.
No. 1 cable shop Comcast saw its shares double in value last year. Now some investors see the recent pullback, due to spending concerns, as a buying opportunity.
“I’m buying cable whenever I can,” says one hedge fund manager who is long Comcast and Cablevision (CVC:NYSE).
Cable fans are encouraged by the success of the triple play. It seems consumers are eating up the bundle of fast Internet, phone and advanced TV services packaged in an all-for-one price. Despite billions of dollars spent by Verizon (VZ:NYSE) to get fiber into homes, and the more tepid approach to network upgrades by AT&T (T:NYSE), cable companies have been able to hang on to and even take market share from telco rivals.
Riding the increased popularity of flat-screen high-definition TVs, cable companies have found strong demand for advanced digital services like digital video recorders, video-on-demand and features like “Start Over” that allow viewers to record and rewind live shows.
And with throughput speeds for cable modem Internet going up, cable has been winning DSL customers away from phone companies.
“People go for speed,” said another money manager who likes Comcast. With more than one computer hooked up at home, you are going to choose a faster connection, he says.
“Given a choice between [slower] DSL for $17 a month and [faster] cable modem for $40, people are going to pay the $40,” says the self-described value/growth investor.
All eyes will turn to Cablevision on Feb. 27, when the Bethpage, N.Y., cable operator is due to post its fourth-quarter earnings.
Cablevision has faced a major marketing onslaught on its home turf by Verizon’s FiOS TV, Net and phone offering. Yet its sales continue to grow, thanks to its competing triple-play package.
In a recent research note, Merrill Lynch analyst Jessica Reif Cohen wrote glowingly about Cablevision’s industry-leading performance.
Cablevision has the highest digital-video and high-speed-Internet penetration in the industry, Reif Cohen writes. And its annual cash flow per subscriber is $512, which is about 15% higher than Comcast’s.
Cablevision shares were up 38 cents to $29.14, and Comcast, while down 9% from its 52-week high last month, rose $1.01 to $40.99 Tuesday.