Fears Of Rising Interest Rates Hurt Cable TV Companies

Shares of Comcast Corp. and TeleCommunications Inc. fell more than 9 percent this week amid concern that rising interest rates and competition will hinder cable television companies’ earnings.

Tele-Communications shares fell to 11-3/8 from 12-1/2 at last week’s close. Comcast’s stock lost 9.63 percent to 15-1/4.

The Federal Reserve last week raised the overnight bank loan rates a quarter point to 5.5 percent to stem inflation, raising the cost of cable companies’ planned borrowings for equipment. Many of the companies are upgrading their systems to fiber optics, capable of handling increasing numbers of channels, digital programming and data transmission for Internet access.

“A combination of rising interest rates and a continuing cloud of competition (is) a lethal combination,” said Douglas Shapiro, an analyst at Deutsche Morgan Grenfell.

Cablevision Systems Corp. shares dropped 3.6 percent this week. The stock rose 1-3/4 to 29-3/4 Friday, the industry’s strongest showing.

Time Warner Inc., parent of Time Warner Entertainment, fell 2.27 percent this week to 43. US West Media Group, parent of Continental Cablevision, fell 8.6 percent to 17-1/4.

Merrill Lynch & Co. analyst Jessica Reif said in a report that “absent a revenue acceleration,” companies would have to restructure or sell assets to improve “near-term share appreciation.”

Englewood, Colorado-based TeleCommunications, in the midst of a turnaround, may take longer to recover than originally anticipated, analysts said. Two weeks ago, the company’s new president, Leo Hindery, said subscriber growth in the first quarter will be unchanged or will fall in year-to-year comparisons.

“There’s no news out there that I’m aware of” contributing to the week’s decline, said Linda Dill, director of investor relations at TeleCommunications, the nation’s largest cable operator.

Tele-Communications could see its basic subscriber count drop in the first quarter by 50,000 and its payper-view subscribers drop by 300,000, because of higher rates imposed in January, Reif said. The rest of the industry is adding subscribers at an average rate of 2 percent a year, Reif wrote.

Some investors may have sold cable stocks because of misconceptions about a potential negative impact from this week’s Federal Communications Commission’s decision to issue digital licenses to broadcasters, Shapiro said.

While cable operators are required to delegate a percentage of their channels to local broadcasters under federal must-carry rules, the regulations don’t apply to digital as well as analog signals.

Some of the stocks that moved substantially on Friday:

NYSE

IBM, down $1.87-1/2 at $129.25.

Merrill Lynch lowered its intermediate-term rating on the computer maker to “neutral” from “buy,” the Dow Jones News Service reported, citing a contact at the investment firm. Recent published reports have speculated that IBM’s earnings will come in below already reduced projections.

General Motors, down $.37-1/2 at 54.

Chrysler, unchanged at $30.12-1/2.

Prudential Securities lowered its rating on the automakers to “hold” from “buy,” the Dow Jones News Service reported, citing a contact at the investment firm said. Further details weren’t immediately available.

NASDAQ

Autocam, down $1.50 at $9.25.

The auto-parts maker’s profit for the quarter ended March 31 will be below expectations.

Eclipse Surgical Technologies, up $1 at $6

Clinical tests of the medical device company’s transmyocardial revascularization treatment for angina and other heart diseases produced promising results, Eclipse said.