Last week on "Kudlow & Company," I was asked about whether the cable
companies are shorts or not. I answered quickly that while I'm not
short them right now, the cable companies are indeed sells. Here's why.
The bullish logic on the cable companies has been that they pretty much
have 100% of the television market, dominate broadband connectivity and
can now take market share in voice by bundling VoIP (voice over Internet protocol) with their other products.
As every major U.S. cable company, from
Comcast to
Time Warner to
Charter Communications(CHTR Quote - Cramer on CHTR - Stock Picks), is plopping along near its 52-week low, let's go ahead and note that the bull logic has been wrong thus far. And I think it's only going to get worse for the cable bulls from here.
VoIP? It really is going to drive landline voice pricing to zero. That makes the net present value of VoIP subs pretty worthless, too. Want to make money in voice? Wireless is just about the only place of value in voice.
Certainly the cable companies in the U.S., and in many other countries, have to be scratching their heads wondering how to get into the wireless business in a manner such as
NTL did this morning with the formal announcement that it is taking over Virgin Mobil. Of course, NTL's
stock has long done what the U.S. cable companies haven't: It goes up, and the
stock is up more than fivefold since the beginning of 2003. The
company has been growing and
executing, and now the company has more financial and currency
flexibility than
these U.S. cable companies.
You really think Comcast or Time Warner have either the financial
ability or the guts to try to buy a major wireless carrier? What are they
going to
do, merge with
Alltel, which is really the only viable wireless
carrier for them now? As Alltel's market cap, before any premium that
would be required, is already $25 billion, I don't think Comcast could
raise the money, even if it wanted to. And Time Warner? Maybe it can
trade AOL for Alltel. (Just kidding, though
Google did put a value on
AOL of about $20 billion or so when it gave AOL a billion for a 5% stake.)
Cody Willard
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