updated 5/6/2005 4:49:03 PM ET 2005-05-06T20:49:03

The first quarter of 2005 has seen a rapid expansion of the subscriber base for multi-channel television, according to the latest results from satellite and cable companies.

In recent years, the growth of satellite operators has often been at the expense of cable subscriber numbers. However, in the most recent quarter, cable subscribers have only fallen by about 21,000 but satellite subscribers have risen by 830,000.

According to Sanford Bernstein research, this suggests an annualized subscriber expansion rate of 3.6 percent, the most rapid growth in the past five years.

"This is a surprising or even shocking result given the maturity of the market," said Craig Moffett, analyst at Sanford Bernstein.

More than 80 percent of U.S. households subscribe to some form of multi-channel television. The number of household formations is growing at a pace of about 370,000 per quarter. "Faster housing starts and continued brisk home sales bolster the case for faster growth in the first quarter," Moffett said. He said improved technology to detect or deter illegal usage of satellite or cable services was increasing subscriber numbers.

On Thursday, Echostar Communications, the second-biggest satellite operator, announced 325,000 new subscribers in the first quarter. This followed an announcement this week by DirecTV the biggest satellite company, controlled by Rupert Murdoch's News Corp, of 505,000 new customers in its first quarter.

Charlie Ergen, chairman and chief executive of EchoStar, said it was particularly important to attract new customers with solid credit histories. "It is easy to get customers if they don't have social security numbers and don't have credit we could get 1 million a month. But you have to be very disciplined," he said, adding that competition was increasing from telephone companies. Cable companies, increasingly offering customers data and telephony services with video subscription, are reporting lower numbers of cancelled subscriptions, considered to be central to increasing profitability.

Comcast, the biggest cable operator, was the only one to report a sizeable loss in subscribers, with 26,000 net losses. Analysts said that could partly reflect the fact that Comcast was rolling out its telephony services later than rivals such as Time Warner.

Moffett said the rapid subscriber growth raised the question whether the businesses were becoming more cyclical. "This will become clearer if interest rates spike up," he said.

© The Financial Times Ltd 2013. "FT" and "Financial Times" are trademarks of the Financial Times.


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