UBS Securities analyst Aryeh Bourkoff took a look at capital spending among cable and satellite-TV providers and measured capital dollars per revenue generating unit — a yardstick cable has adopted to tally customer adds for digital video, telephony and Internet-access services separately.
Because satellite providers only offer video, that’s a comparison that favors cable, which can get more RGUs for every dollar spent. Cable’s share of new revenue units is increasing, from 76% in 2005 to 83% this year and 86% in 2007, UBS said in a June 5 report on the topic.
UBS estimates cable will spend $903 per RGU added in 2006, declining to $824 each in 2007. DBS providers will spend $1,764 per RGU add in 2006, rising to $2,405 each in 2007. UBS analyst John Hodulik estimates each fiber-to-the-premises FiOS TV video customer Verizon Communications Inc. adds costs the telco $2,250, as a point of comparison.
Cable capital spending is rising, but 70% plus is estimated to go for customer premises equipment geared to new services, such as digital video recording and high-definition television set-tops and gear needed to provide voice over Internet protocol service.
Bourkoff concluded that differences in RGU calculations don’t materially alter the analysts’ conclusions on cable and satellite stocks. UBS has “buy” ratings on Comcast Corp. and Cablevision Systems Corp. and a “neutral” rating on DirecTV Inc.
