Calculating Fios' Effect On Cablers

NEW YORK -- Which cable operators are most exposed and vulnerable to competition from telecommunications giant Verizon's FiOS video and high-speed Internet services?

This question has been on cable investors' minds ever since the launch of FiOS, even though most seem to feel that it has so far not made major inroads.

Citigroup analyst Jason Bazinet last week provided a road map for investors, detailing in a new research report the overlap various cable firms have with FiOS and confirming that most cable shareholders don't need to fear much -- at least for now.

His conclusion: "Cablevision (Systems) continues to have the highest FiOS exposure" as the service is available in 23% of the company's homes. "Mediacom (Communications), on the other hand, faces the lowest FiOS exposure. Less than 1% of Mediacom's homes have a FiOS alternative."

Privately held cabler Cox Communications has an exposure in between those two extremes, with about 6% of its markets overlapping with FiOS, according to Bazinet.

"Most other cable firms -- including Comcast, Time Warner and Charter (Communications) -- have relatively low FiOS exposure of around 2%-4%," he concluded.

The analyst's research also shows that New York, New Jersey and Texas "have received the lion's share of FiOS investments thus far" with 63% of the video infrastructure and 49% of the high-speed Internet infrastructure present in those three states.

With Cablevision being strongest in New York and New Jersey, it is no wonder that it is more exposed to FiOS competition than its peers. Bazinet estimates that 735,000 of Cablevision's households in New York can get FiOS high-speed Web service, with 563,000 able to receive the FiOS video service.

In New Jersey, his estimate is for 270,000 households each that can get those services.

"For most cable firms, we think it's simply too early to expect FiOS to have a material impact on a cable company's near-term operating results," Bazinet concluded in his interpretation of the findings.

"The only exception to this macro view is Cablevision," Bazinet wrote. "Due to the ... relatively high penetration rates across most services -- coupled with the high FiOS risk -- we think Cablevision could see multiple compression."

As such, he rates the company's shares a "sell" with a $25 price target. Over the past year, the stock has traded between $18 and $31.