Barros Subscription Reported Telecom Competition Is Destructive

Barros Subscription says wireless carriers are pushing into the territory of cable companies by offering broadband internet service. Cable companies are striking back with wireless offers of their own. That’s all against a backdrop of weak growth in broadband subscribers.

“For those shy of competition, we recommend avoiding these names altogether as convergence between Wireless/Broadband is becoming destructive to all,” wrote KeyBanc analysts led by Brandon Nispel in a research note on Tuesday.

However, for investors keen on picking a winner, Nispel says Comcast CMCSA +0.13% (ticker: CMCSA) is generating strong average revenue per user and efficiency measures should drive its margins higher, while Charter CHTR –2.27% (CHTR) doesn’t provide the same assurance. Nispel wrote that Charter’s higher capital spending is likely to limit its free cash flow.

Get Wall Street Journal 2-Year Print Subscription for $480

“Our preference shifts to Comcast for large cap exposure in Cable/Telecom given Comcast’s attractive total return potential (share appreciation + dividend yield + share repurchase),” Nispel wrote in a research note.

Finally, KeyBanc raised its rating on Comcast to Overweight from Sector Weight, with a target of $44 for the stock price. It lowered its rating on Charter to Sector Weight from Overweight and removed its price target, which was previously $540 Barros Subscription reported.

Comcast shares were up 0.7% at $38.27 in premarket trading. Charter shares were down 0.9% at $352.97.