Rough Year Hits Mediacom’s Rating

10/19/2007 8:00 PM Eastern

Pali Research media analyst Richard Greenfield lowered his rating on Mediacom to “sell” from “neutral,” adding that the midsized-market cable operator is headed for a rough year.

Greenfield wrote in a research report that Mediacom is facing challenges on several fronts, including increasing bad debt from its telephony product offering and aggressive marketing campaigns from satellite companies fueled by the cable operator’s decision not to offer the Big Ten Conference’s regional sports network.

Greenfield wrote that he had raised his rating on the stock in June to “neutral,” after Mediacom’s protracted retransmission-consent battle with Sinclair Broadcasting Group ended and investors appeared to be focused on the upside from a potential takeover of the company. That takeover never materialized and is even more unlikely now, Greenfield wrote.

Now, with its decision not to carry the Big Ten Network, the cable operator could face more customer defections as college sports fans in its markets move to satellite-TV competitors like DirecTV Group and EchoStar Communications, which carry BTN.

“First, Sinclair, now Big Ten — it’s simply tough to be a MCCC subscriber this year — with the Big Ten situation likely to intensify as college basketball season approaches,” Greenfield wrote.

Greenfield estimated that cash-flow growth in the second half of the year will likely be in the 6% to 7% range, instead of management’s guidance of double-digit growth.