What happened
Shares of cable television and broadband service provider Altice USA (ATUS -2.54%) were down by 12.5% near the end of Thursday's trading session after a warning that the company would report a net loss of broadband subscribers for the current quarter.
So what
According to reporting from Bloomberg, Altice CEO Dexter Goei cautioned investors attending a Goldman Sachs investor conference on Thursday that his company was on pace to lose between 15,000 and 20,000 subscribers for the quarter that will end this month.
Image source: Getty Images.
The warning was jarring to investors who had taken solace in the fact that high-speed internet customer growth has been offsetting the loss of customers due to an ongoing streak of cable service cancellations -- better known as cord-cutting. A growing number of streaming services has allowed consumers to cancel cable and utilize a curated collection of these over-the-top television options. For perspective, Altice USA ended the second quarter of the year with about 4.4 million broadband customers and without adding a meaningful number of subscribers during that three-month stretch.
Now what
Altice isn't the only cable television provider to indicate its broadband business growth is slowing down. Comcast (CMCSA 0.82%) CFO Mike Cavanagh commented at an investor event last week that his company is also facing a slowdown in broadband customer additions. The slowdown is likely more cyclical for the entire industry and not a company-specific issue. For headwinds like this, there is no quick or easy fix as the reduction in the number of broadband subscribers is likely a sign that the market is near or at saturation.
Given this backdrop, the smart-money move here is to avoid broadband until the situation becomes more clear. The cable industry will be able to survive little-to-no opportunity to grow its high-speed internet customer base. But it's a shift that could take several quarters to fully figure out. The continued wave of cord-cutting only makes matters more complicated while making these cable television providers a bit more challenging to own. Altice USA is a particularly tough pick to stick with since it doesn't operate any other business, whereas Comcast also owns Universal, NBC, and Europe's Sky.
