Malone’s take on voIP per Natexis Bleichroeder, an analyst covering NTOP and Liberty Media:
LIBERTY SHAREHOLDER MEETING SHEDS LIGHT ON L’S STRATEGY; FAIR VALUE ADJUSTED TO REFLECT SPINOFF:
On June 9, 2004, Liberty Media held its annual shareholders’ meeting. Although these meetings are usually uneventful, we think in this case substantial light was shed on plans for Liberty’s future after the Liberty Media International spinoff. Because many investors do not usually attend these meetings, we decided to highlight some of Dr. John’s wisdom from this one in this note.
Malone stated that he thinks VoIP is great for cable because the quality has improved dramatically and the cost to deploy the service has fallen. He said he expects a widespread explosion of the service near term. As far as the impact the service will have on the RBOCs, Malone called VoIP a “spike through the heart” because it should be more rapidly deployed than anticipated.
1. He noted that the cable companies have to offer the service fast because the RBOCs will cut pricing on DSL to protect their core voice business.
2. In response to cable VoIP deployments, the RBOCS will need to offer either video over IP service (currently very difficult) or continue to market with the DBS firms, both not perfect solutions (the latter has been tried before many times and has never worked).
We agree with Malone’s sentiment on this and think in the near term, as cable VoIP deployments and uptake numbers are announced, domestic cable multiples are likely to expand due to expected free cash flow generation and growth going forward and the impact the deployments will probably have on other cable-based offerings (reduction in churn, higher digital penetration, etc.). |
