When football fans plop down in front of their TVs to watch Super Bowl XXXVII this weekend, about 58% of them will be viewing the plays – and the much-anticipated commercials – on a crisp cable signal. That’s about 1.1% fewer than last year (this is the first-ever yearly decline in basic cable subscribers), but cable providers have been able to offset those losses by increasing rates and selling pricey new features. Overall, industry revenues jumped more than 12% in ‘02.
The most obvious way to invest in cable is to buy shares of Comcast, the industry's newborn gorilla. Its November merger with AT&T's cable unit created the nation's largest system, with 22 million subscribers. Cost savings should boost cash flow, and Comcast will need it -- the merger nearly tripled its debt, to $30 billion.
If all goes well, says Morgan Stanley, Comcast could be generating positive free cash flow by next year. Another plus: Comcast is "ripping the cover off the ball" with its rapidly growing Internet service, says Morningstar analyst Todd Bernier.
Comcast Class A shares (CMCSK) do not. If you're not concerned about voting rights, buy the cheaper original shares.
GETTING STARTED
Use