Broadband customers rose by about 16,000 in the first quarter at Mediacom Communications, slightly behind last year’s torrid pace, but enough to drive double-digit cash flow growth at the mid-sized cable operator in the period.

Those broadband additions led to a 15.8% increase in overall high-speed data revenue to $258.7 million, which drove adjusted OIBDA (Operating Income Before Depreciation and Amortization, a measure of cash flow) up 15.2% for the company. Overall revenue was $547.5 million, up 5.8% from the prior year.

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Video subscribers declined by 17,000 in the period, the same number the company lost in the prior year. Phone subscribers fell by 12,000 in Q1, compared to a loss of about 5,000 in the same period in 2020.  

“The first quarter of 2021 marked another exceptional operating period for Mediacom, as we registered our third straight quarter of industry-leading Adjusted OIBDA growth with a 15.2% increase from the prior year period and extended our streak of year-over-year revenue growth to 97 consecutive quarters,” chairman and CEO Rocco Commisso said in a press release. “Notably, despite Mediacom becoming a meaningful taxpayer in 2021, we generated $129.5 million of after-tax free cash flow, and our net debt leverage declined to an all-time low of 1.67x.”

Credit ratings agency Moody’s Investors Service raised its rating on the cable television sector to “positive” from “negative” on Tuesday, fueled mainly by expected growth in broadband.

In a research note Tuesday, Moody’s wrote that it expects cash flow in the sector to rise more than 5% over the next 12-to-18 months, based on the continued rise in broadband customers due to the pandemic. 

In the report, Moody’s noted that cable broadband subscribers grew by about 2.5% (3.5 million customers) in Q2, and market penetration rose to 50% in the period, compared to 48% in the prior year. This despite video and voice customer declines in the 4-6% range annually. Moody’s estimated that broadband is replacing video at a 1.9 times clip, rising to 2.2 times in Q2 for the first time in five quarters, a sign of future strength.

Although 5G wireless deployment could cut into wireline growth, the credit ratings agency noted that most operators are prepared to both defend against the threat and participate in the opportunity by expanding their footprints and purchasing spectrum.  

"We believe the cable sector has less exposure than many others because voice and video subscriber losses have temporarily moderated, and there is much greater demand for residential broadband," Moody’s senior vice president  Jason Cuomo said in the report. "Video viewership and engagement is rising sharply as subscribers spend extraordinary time watching TV news and entertainment programming."

Moody’s expects broadband subscribers to rise by at least 4% over the next 12-to-18 months, driven  by demand for greater capacity and speed. Video customer losses are expected to rise beyond 5% over the same period, according to Moody’s. 

With Comcast, Charter and Altice USA expected to release earnings in the next few days, analysts are bracing for what they expect to be a lengthy bout of video subscriber losses as consumers, financially constrained by the COVID-19 pandemic, look for ways to cut costs.

That will likely mean that while streaming viewership and broadband availability is on the rise, video losses, already impacted by SVOD offerings from Netflix, Hulu and Amazon Prime, will mount as the pandemic continues.

AT&T set the tone after reporting video subscriber losses of about 1.04 million in Q1 (897,000 at its DirecTV and U-Verse units and 138,000 at AT&T TV Now), with the pandemic only affecting two weeks of the quarter. While AT&T has other problems -- DirecTV has been steadily losing subscribers, it stopped adding new customers to U-Verse in April and is expected to steer video customers to its streaming offerings like HBO Max -- the losses have concerned some analysts.

“It’s going to be a very, very, bad stretch for cord cutting,” MoffettNathanson principal and senior analyst Craig Moffett said in a conference call with clients.

Sanford Bernstein media analyst Peter Supino has predicted that Q1 sub losses could be as high as 1.5 million in the cable sector. In a research report Supino estimated that Comcast, slated to report its Q1 earnings on April 30, would lose about 350,000 video customers in Q1. That’s about 30,000 more than he predicted earlier in the year. At Charter, he sees video subscriber losses at 180,000 (up from 150,000 previously), while Altice USA should lose about 50,000 video customers in the period instead of the 40,000 he earlier predicted.

Broadband growth also is expected to slow. Supino estimated Comcast would add 340,000 internet customers in Q1 instead of the 395,000 he had previously predicted. At Charter, he dropped his HSI estimate to 300,000 from 350,000 additions, while his forecast for Altice USA internet adds was unchanged at 10,000.

Evercore ISI media analyst Vijay Jayant was a little more optimistic. He expects Charter to lose 170,000 residential video customers (up from the 150,000 he earlier expected them to lose), while Altice USA should lose about 60,000 video subscribers, up from the 50,000 he previously predicted. Comcast should stay steady at 220,000 residential video customer losses, according to Jayant.

Both Supino and Jayant saw the greatest customer losses coming in Q2, the first full quarter under the pandemic. Jayant expects video customer losses at Comcast to more than double his previous estimates to 575,000 in Q2. At Charter, he expects video sub losses to double previous estimates to 379,000, while Altice USA will see a less dramatic increase, losing about 48,000 video customers compared to the 30,000 he predicted earlier.

But both analysts agree that any subscriber erosion due to coronavirus is a combination of shrinking income -- to date 26 million U.S. jobs have been lost as a result of the pandemic -- and the loss of live sports programming. Jayant noted that live news and sports are the primary drivers for pay TV subscriptions, so the loss of sports programming makes the decision to cut the cord easier.

“While news viewership has soared since the coronavirus crisis hit, live sports content has ground to a halt, removing a key reason for consumers to keep pay TV services, especially since news content is relatively readily substituted with online or streaming options,” Jayant wrote.