Altice USA (NYSE:ATUS) has experienced fewer customer losses that some of its rivals, such as Comcast (NASDAQ:CMCSA), but they've been steady nonetheless, and after raising its monthly rates for its Optimum cable TV service by $20 a month, they just might begin accelerating.
Cord-cutting has always been an ominous cloud for TV service providers, and cable operators have increasingly been handing their customers the scissors by embracing streaming services of their own, like Comcast's Peacock TV. But that may not be working, either.
Although Altice seems to be doing better than most, let's look at what investors might expect when the cable operator reports fourth-quarter results on Wednesday, Feb. 12.
Unplugging for good
The outlook hasn't looked promising for cable operators lately. Comcast, for example, reported that it lost another 149,000 residential video subscribers in its own fourth quarter while AT&T (NYSE:T) lost 142,000 cable internet connections plus 41,000 DSL customers. All told, AT&T lost 945,000 traditional pay-TV subscribers during the period, or about 10,000 subscribers every day.
Altice, on the other hand, lost 32,000 cable customers in its third quarter, which ended on Sept. 30, bringing the total to almost 94,000 year to date. Yet it was able to offset the decline somewhat by adding 15,000 broadband subscribers in the quarter, or 84,000 for the first nine months. So it's not seeing the same hemorrhaging as the others, though it has lost 38,000 telephone subscribers, too.
Paying more for less
Like its peers, though, Altice has increased its subscription rates, which will very likely cause more customers to decide they don't need the full range of services the operator offers if it's going to cost an additional $240 a year.
Even if customers aren't paying the full price because of discounts, cord-cutting is now a very simple and cheap alternative. Depending on the type of TV or movie viewing someone does, it can cost subscribers just a fraction of what they were paying before, if not make it completely free.
That hasn't worried CEO Dexter Goei, who remains upbeat. Even though Altice's performance in the third quarter was weaker than expected, Goei highlighted the company's investments in Altice Mobile, Altice One, and Altice Fiber, which he expects will receive more marketing in the future. He added, "As we now turn our focus to scaling our efforts, we look forward to accelerating our revenue and adjusted EBITDA growth in 2020 as we begin to realize the benefits of our investments."
A skinnier option
But that wasn't enough to prevent Altice from lowering its full-year guidance. Even though it had just raised its outlook in the second quarter, it cut it again in the third and said it expects revenue growth to be about 2.5%, down from its previous guidance of 3% to 3.5%, because it's expecting a slower ramp up from Altice Mobile handset equipment. The new outlook is also somewhat below its original guidance of 2.5% to 3% growth.
So Altice might not see the dramatic subscriber exodus currently underway at AT&T and Comcast, but with analysts looking for just 2% revenue growth to $2.51 billion and earnings of just $0.20 per share, the cable operator might not produce the clear investment benefits it's made pay off as quickly as hoped.