Research released today by SNL Kagan projects cable MSOs' (multiple system operators) revenues to climb from $81 billion this year to nearly $120 biilion by 2018, with the gain fueled largely by sales of advanced services.
In its 28th annual “Broadband Cable Financial Databook,” the firm says U.S. cable operators are expected to add 48 million subscribers to advanced services over the next decade. Although the growth in revenue-generating units (RGU) and falling capital expenditures point to increased free cash flow, growth is expected to be moderate due to intensifying competition from telco video providers and DBS.
Still, SNL Kagan contends, cable MSOs are expected to maintain their subscriber base over the medium-term, thanks to the competitive advantages they enjoy. As of the end of the second quarter 2008, there were 64.6 million basic video subscribers served by cable MSOs, 31 million direct broadcast satellite subscribers and 2.1 million telco video subscribers.
SNL Kagan’s five-year outlook estimates 64.3 million, 33.4 million and 11.3 million in each category, respectively.
Cable’s larger footprint and growing multiplicity of services will allow the sector to remain the largest provider of consumer entertainment and communications in the 10-year outlook, according to the company. “Thus far in 2008, cable MSOs have posted impressive revenue and RGU gains, topping telco additions of high-speed data subscribers and boosting voice subscribers as telcos face persistent line losses.”
Robin Flynn, senior analyst at SNL Kagan said, in prepared comments: “Cable MSOs have been able to gain traction from technological advances, not only because they stand to reap basic sub gains from broadcasters’ digital transition in February 2009, but they are also executing their own digital transition to reclaim video bandwidth and expand their capacity to offer higher-margin services, faster Internet speeds and more interactive services, thus sustaining growing ARPUs.”
