Katrina Costs Cable Millions as Billing Stops
Cable operators -- which stopped billing some subscribers affected by Hurricane Katrina -- likely will lose tens or hundreds of millions of dollars in revenue, plus the cost of restoring operations, analysts said. Cable One and Cox are among Gulf Coast cable operators that suspended billing in disaster areas, firm officials said Tues. Comcast is issuing credits “case by case” and area by area, a spokesman said. Mediacom, which some analysts said may be the region’s worst-hit cable operator, didn’t comment.
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Cable One, Miss.’s largest cable provider, may not charge customers for months, a spokeswoman said. The firm has about 110,000 affected customers, of whom as many as 37,500 may have lost their homes, she said, citing preliminary estimates. “We don’t know for how long we're not charging customers; it could be extensive,” she said: “We're going to do as much as we can to get our associates back on their feet so they can get started rebuilding our cable systems.” The spokeswoman and officials at Cox and Comcast said it’s too early to estimate damages. One piece of good news is that no cable employee injuries or deaths have been reported.
“Financially, there is going to be a material impact,” said Rob Routh, cable analyst at Jefferies & Co. “I wouldn’t even venture to guess how many millions, if not how many hundreds of millions.” In New Orleans alone, where Cox’s 270,000 customers largely lack service, the company may lose $20 million a month, said consultant Bruce Leichtman, ex-mktg. dir. Continental Cable. “It’s going to be very material for Cox,” said Routh. “It’s a good thing they're a private company now, because they are not going to feel it in the public markets.” But it’s too soon to handicap telecom losers and winners, said analysts who are unable to gauge costs. “That’s going to take a while to understand how their infrastructure and how their personnel [have] been affected by this,” Leichtman said of #1 La. cable provider Cox.: “Literally, the dust will have to settle.”
Near term, 3rd-quarter cable growth may sag due to the storm, said Janco Partners analyst Matt Harrigan, who follows Comcast and Mediacom and doesn’t own their stock: “Long-term, I don’t think it’s going to be all that significant.” Other analysts disagreed. Besides lost subscriber fees, operators will have expenses from operating in the region, Routh said. Repair work, rebuilding systems and reconnecting lines between homes and utility polls will boost costs further, he said. “What you're really losing is probably one, if not many, years of revenue from a geographic area,” Routh said. “But first the houses have to be rebuilt.”