Moffett on Comcast 2Q: Sunny with Chance of Regulatory Clouds

Says NBCU deal conditions will affect future cash flow

By John Eggerton -- Broadcasting & Cable, 7/28/2010 9:46:48 AM

"Game, set and match" in the broadband wars was how Sanford Bernstein Analyst Craig Moffett characterized Comcast's just-released quarterly earnings, and that was on a number that failed to meet expectations. But Title II reclassification is a cloud over that sunny prediction, and Comcast/NBCU deal conditions could further cloud the picture.

According to a report issued early Wednesday, Comcast only picked up 118,000 broadband subs in the second quarter of 2010, well shy of the 204,000 that Moffett called the consensus expectation. But given sub losses at the telcos, he suggested that still bolstered the long-term "bull case" for cable "winning the broadband wars."

"Remarkably," he said, cable stocks remain cheaper than telcos. Sanford Bernstein has gotten more bullish on the telcos over the prospects of wireless data, but still sees cable as the long-term plan, but with a regulatory caveat.

He predicts that cable's growing broadband strength vs. the telcos will make the "political will" to regulate it that much stronger.

Despite talks of a legislative solution to clarifying the FCC's broadband oversight powers, Moffett said he still expects reclassification to be the ultimate outcome. "Unfortunately, regulation would create - almost by definition - an asymmetry; unlimited downside risk, but starkly capped upside."

Another x factor, he says, is the NBCU merger review, one that he says will bring with it "myriad conditions"--Comcast has already agreed to a number of them in deals with minority and station groups--that will affect future cash flow.

"Given those risks," he said, "we remain on the sidelines."