Moody’s Says Broadband Subs Replacing Video at Slower Pace

Moody’s Investors Service, in a new report, says the pace at which distributors are replacing lost video subscribers with broadband customers slowed in the first quarter of this year.

Moody's Video Replacement Rate (VRR), a ratio which measures that pace, fell to 3.9x in the first quarter, compared to 4.7x in the fourth quarter of 2017, for rated-US cable companies. Comcast led in the first quarter with a 13.6x VRR, while WideOpenWest Finance had the weakest rate at 0.4x.

"The VRR is an important metric to monitor as it signals how well a company is managing the secular shift towards broadband," said Moody’s VP-senior credit officer Jason Cuomo in a statement. "As the sector continues to shift more heavily toward broadband subscribers (now at 1.3x video), the superior economics of broadband has greater influence on the overall business model."

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Broadband subscriber growth decelerated by 200 basis points in Q1, to 4.5%, driving the VRR lower, according to Moody’s. The decline was driven by Comcast and Charter, which posted broadband growth of -0.3% and -0.5%, respectively, and represent nearly 80% of the sector's subscriber count.

"Video churn remains troubling, with conditions worsening for the last 6 quarters, falling persistently from -0.6% in Q3 2016 to -2% in Q1 2018," notes Cuomo.

Related: Pay-TV Subscriber Declines Stabilize in Q1

Meanwhile, the sector's revenues grew 4.1%, down 200 basis points from the prior quarter, while EBITDA growth fell to 6.1% from 6.8%. Moody's projects the VRR will continue to fall, suggesting revenues and EBITDA growth will drop even further.

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