Viacom: Better But Still Too Early

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Viacom (VIA) reported slightly better than expected that 3Q05 earnings although almost all the excess was earned in the volatile and difficult to predict Entertainment division. Earnings came in at 47 cents against estimates of 45 cents. The company incurred $58 million in one-time expenses related to the split, hurricanes, and an impairment charge. Applying the tax rate in the quarter means this cost the company another 2 cents.
Most VIA investors focus on segment results and on this basis results were quite close to analyst estimates except at the movie studio. Overall, revenue grew 10% and EBITDA grew 5% as margins declined due to investments in content including programming and broadband initiatives. Revenue grew more than expected while EBITDA was in line analyst estimates….

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Charter: A Very Expensive Option

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Charter Commications (CHTR) reported mixed results for 3Q05 with EBITDA falling short of expectations while subscriber metrics showed better than expected growth in new services. The company also announce settlement of a dispute over some shares held by Paul Allen in a subsidiary. To be completely honest, I was unable to decpiher the press release on this matter and could not follow the analyst questions on the conference call either. If I can figure it out and it is relevant, I’ll post separately.
Overall, given the EBITDA and free cash flow shortfall I see no reason for CHTR shares to trade up off the quarter. Debt currently exceeds the public value of subscribers and barely matches the private value. This leaves no value for shareholders beyond option value related to either a turn to free cash flow or a Paul Allen led bailout. There is no hope for enough free cash flow in the next few years to fix the balance sheet. So you are waiting on cable stocks to rise or for Paul Allen. That is not for me as I’d rather own Comcast (CMCSA/K).

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Central European Media Enterprises: Takes Control of License in Slovakia

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Central European Media Enterprises (CETV) broke a long string of losing days yesterday, rising 4%, or $1.77, to $46.49. The company reports earnings before the open on Wednesday but the trigger for Monday’s advance was more likely the announcement that the company has increased its stake in its Slovakian operation and gained control of the broadcasting license.
For $28.7 million, CETV has raised its economic stake in TV Markiza in Slovakia from 70% to 80%. More importantly, CETV’s stake in the company that owns the broadcasting license goes from 34% to 80%. I am expecting Markiza to produce about $24 million in EBITDA next year, up 12% from 2005….

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