Comcast, TWC, Charter Reveal Capex Plans

BTR_Feature_Art_CAPEX_3_12_13_Capex spending for 2013 is expected to increase at least at three of the largest U.S. cable operators. Speaking recently at a Morgan Stanley Technology, Media and Telecom conference, execs from Time Warner Cable (NYSE:TWC), Comcast (NASDAQ:CMCSA) and Charter Communications (NASDAQ:CHTR) explained where the money will go: primarily to business services, advanced video and smart home.

At TWC, the increase in spending is due in large part to projected growth in business services, said Irene Esteves, CFO and EVP. In 2012, the company added 100,000 new buildings, doubled the number of fiber connections and added 1,900 cell towers. "That takes capital to build that, and that's where we're investing. We're looking at terrific ROIs on that capital spend."

TWC's business services segment should maintain its 20% plus annual growth rate, Esteves said. The sweet spot for the operator is companies with 500 employees or fewer. In its footprint, this group represents a $20 billion market, of which TWC currently represents about $1.9 billion. "We see a long runway of potential growth out there."

Charter estimates a capex target of $1.7 billion for 2013, which takes into account its year-end 2014 goal for all-digital video, said Christopher Winfrey, CFO. The company will continue what it calls its "organic" push, which means that when it stops selling analog in a market, inevitably digital will increase over time.

"We've taken down analog channels along the way to increase our HD lineup and to further get bandwidth to DOCSIS 3.0 to further improve our competitive advantage on the Internet," Winfrey said.

However, Charter now also will move to a "big bang" approach when it comes to digital conversion. "As we get into certain markets and we achieve certain levels of penetration where it becomes less of a disruption in the market ... we will then take off the analog signal and go all-digital," Winfrey said. "That's the all-digital spend."

Comcast's increase in capex spending will come in part from continued investment in XFINITY Home, deployed nationwide this year. The company plans to invest more in the smart home product this year based on early success rates. "Three-quarters of (Home) customers take all four services," said Michael Angelakis, vice chairman and CFO. "About one in five of those customers have never had a relationship with Comcast ... so the business model for XFINITY Home over the five-year period is very attractive."

Additionally, Comcast will continue developing its high-speed Internet business and in particular is deploying wireless home gateways with 200 Mbps of throughput. "Obviously, it's another piece of CPE, but we'll be charging for that, and we think it puts us at a different level ... sort of on par with our best broadband," Angelakis said.

Another two areas that are contributing to Comcast's expenditures for the coming year are video - especially the continued deployment of X1 - and in the business market. "We've really increased our spending in business services over the last two years because that business has performed so well," Angelakis said. (Transcripts of the TWC and Charter discussions can be found at www.seekingalpha.com.)

Monta Monaco Hernon is a free-lance writer. She can be reached at mcmhern@yahoo.com.

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