* Cablevision shares fall 10 pct, DirecTV down 6 pct

By Yinka Adegoke

NEW YORK, Nov 6 Reuters) - DirecTV Group and Cablevision Systems Corp added fewer subscribers than expected in the third quarter as the economic crisis forced cash-strapped consumers to cut back on pay television services.

Shares of both companies, as well as other cable and satellite TV providers, fell on the results, which came a day after Time Warner Cable, the No. 2 U.S. cable operator, warned that it had seen a significant slowdown in subscribers signing up for new video, Internet and phone services.

"We're definitely seeing pressure across the board. There's more competition on each of these services video, data, and phone," said Thomas Eagan, analyst at Collins Stewart.

New York-based Cablevision, whose shares fell 10 percent, lost 19,000 basic video subscribers during the quarter, worse than the 12,000 loss forecast by analysts at Barclays Capital.

But growth in Internet and phone subscribers, while also below expectations, helped Cablevision swing to a profit of $27.1 million, or 9 cents per share, compared with a year-ago loss of $79.3 million, or 27 cents per share. In the third quarter of 2007, Cablevision recorded losses on a series of investments and interest swap contracts.

The cable company also faces fierce competition from Verizon Communication's FiOS TV digital service. Cablevision added 58,000 digital phone subscribers, 31,600 high-speed Internet subscribers, and 25,000 digital video subscribers -- all figures were below Barclays' forecasts of 75,000, 47,000 and 50,000 respectively.

Revenue grew 15.4 percent to $1.745 billion partly boosted by the additions of Newsday newspaper and Sundance cable network, which Cablevision bought earlier this year.

Analysts on average had been expecting profit of 13 cents a share on revenue of $1.685 billion for Cablevision, according to a poll by Reuters Estimates.

DTV

Satellite TV provider DirecTV, which is controlled by media mogul John Malone's Liberty Media, also reported disappointing subscriber numbers.

Its net U.S. subscriber additions totaled 156,000 in the quarter, a slowdown from 240,000 a year earlier. Kaufman Bros analyst Todd Mitchell had forecast 181,000 net additions.

DirecTV blamed the decline in part on the end of a joint marketing agreement with AT&T Inc in the former BellSouth territories on April 1. DirecTV has since signed a new agreement with AT&T, which starts nationally on Feb. 1.

U.S. monthly churn -- the rate at which customers leave -- rose during the quarter to 1.64 percent. DirecTV said this was principally due to a more challenging economic and competitive environment.

DirecTV shares fell 6 percent, more than the broader market. Time Warner Cable shares were down 4 percent, the second day its stock fell.

At DirecTV, net profit rose to $363 million, or 33 cents a share, from $319 million, or 27 cents a share, a year earlier.

Revenue rose by 15.4 percent to $4.98 billion.

Analysts had forecast profit of 35 cents a share on revenue of $4.9 billion.

(Editing by Dave Zimmerman)

((e-mail:yinka.adegoke@thomsonreuters.com Reuters Messaging: Yinka.adegoke.reuters.com@reuters.net; +1 646 223 6081)) Keywords: USA PAYTV/ (Click on http://blogs.reuters.com/category/themes/mediafile/ to see Reuters MediaFile blog)

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But DirecTV shares recovered after Chief Executive Chase Carey said he expects to see continued double-digit revenue growth through the end of the year. Carey said on a conference call that DirecTV expects to add "low to mid 200,000" new subscribers in the fourth quarter.

DirecTV's confidence was in contrast to the caution of Time Warner Cable, which on Wednesday said it had seen a significant slowdown in subscribers signing up for new video, Internet and phone services.

Most other pay-TV companies have yet to give details on how much the economic slump would hurt them next year, but investors had been selling off stocks now to avoid a bad hit.

"The problem is everybody's flying blind. No one has ever seen a market dislocation like we're seeing now," said Bernstein analyst Craig Moffett. "The pay-TV companies are no more equipped than anyone else to estimate just how bad it could get for consumers," he added.

New York-based Cablevision lost 19,000 basic video subscribers during the quarter, worse than the 12,000 loss forecast by analysts at Barclays Capital. Its shares fell nearly 14 percent before recovering to close down 4.3 percent,

Cablevision shares were also pressured by Chief Executive James Dolan saying on the company's earnings call that it is "not actively pursuing any further strategic alternatives" such as a sale of assets, due to adverse market conditions.

The cable operator posted a profit of $27.1 million, or 9 cents per share, compared with a year-ago loss of $79.3 million, or 27 cents per share when it recorded losses on a series of investments and interest swap contracts.

The cable company also faces fierce competition from Verizon Communication's FiOS TV digital service. Cablevision added 58,000 digital phone subscribers, 31,600 high-speed Internet subscribers, and 25,000 digital video subscribers -- all figures below Barclays' forecasts of 75,000, 47,000 and 50,000, respectively.

Revenue grew 15.4 percent to $1.745 billion, partly boosted by the additions of Newsday newspaper and Sundance cable network, which Cablevision bought earlier this year.

Analysts on average had been expecting profit of 13 cents a share on revenue of $1.685 billion for Cablevision, according to a poll by Reuters Estimates.

DTV

Satellite TV provider DirecTV, which is controlled by media mogul John Malone's Liberty Media, also reported disappointing subscriber numbers.

Its net U.S. subscriber additions totaled 156,000 in the quarter, a slowdown from 240,000 a year earlier. Kaufman Bros analyst Todd Mitchell had forecast 181,000 net additions.

DirecTV blamed the decline in part on the end of a joint marketing agreement with AT&T Inc in the former BellSouth territories on April 1. It has since signed a new agreement with AT&T, which starts nationally on Feb. 1.

DirecTV has outperformed pay-TV rivals by positioning itself as a high-end premium service. But its U.S. monthly churn -- the rate at which customers leave -- rose during the quarter to 1.64 percent, which DirecTV said was principally due to a more challenging economic and competitive environment.

"While we view the pay-TV space as relatively defensive, as the past week's results have shown, no service provider is immune from deteriorating economic conditions, including those positioned at the high-end, such as DirecTV," Goldman Sachs analyst Ingrid Chung wrote in a note to clients.

At DirecTV, net profit rose to $363 million, or 33 cents a share, from $319 million, or 27 cents a share, a year earlier. Revenue rose 15.4 percent to $4.98 billion. Analysts had forecast 35 cents in per-share profit on $4.9 billion revenue.

DirecTV shares initially fell nearly 8 percent before recovering to close down less than 1 percent at $20.76, outperforming a broader market downturn. Time Warner Cable shares fell 5.2 percent TO $18.86 and Dish Network Corp , which reports results next week, fell 4.5 percent to $15.05.

(Click on for Charter Communications results)

(Editing by Dave Zimmerman, Matthew Lewis and Bernard Orr)

((e-mail:yinka.adegoke@thomsonreuters.com Reuters Messaging: Yinka.adegoke.reuters.com@reuters.net; + 1 646 223 6081)) Keywords: USA PAYTV/

Keywords: USA PAYTV/ (Click on http://blogs.reuters.com/category/themes/mediafile/ to see Reuters MediaFile blog)

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--Short-term IDR at 'F1'.

In addition, Fitch has affirmed the ratings assigned to AT&T's debt classes and the IDRs and ratings of the other AT&T-related issuers listed at the end of this release. The Rating Outlook is Stable.

In addition, Fitch has placed the ratings for Centennial Communications Corp. (Centennial) (Nasdaq: CYCL) and its subsidiaries on Rating Watch Positive as follows:

Centennial Communications Corp.

--IDR 'B';

--Senior unsecured notes 'CCC+/RR6'.

Centennial Cellular Operating Co.

--IDR 'B';

--Senior secured credit facility to 'BB/RR1';

--Senior unsecured notes to 'BB/RR1'.

The rating actions reflect AT&T's Nov. 7, 2008 announcement that it will acquire Centennial for $944 million in cash. Including the value of Centennial's debt, the total value of the acquisition is approximately $2.8 billion. Centennial provides wireless services to 1.1 million subscribers in the Midwest and Southeast U.S., as well as Puerto Rico and the U.S. Virgin Islands. The companies have not disclosed potential synergies but they could be large, given existing roaming arrangements in the Southeast and Midwest properties. In addition, Centennial has a backbone network in Puerto Rico that would provide further synergies to AT&T's business customers.

The transaction is subject to regulatory approvals and the approval of Centennial's shareholders, among other closing conditions. Centennial's largest shareholder, Welsh, Carson, Anderson & Stowe, has agreed to vote in favor of the transaction. Approvals are expected to be obtained by the end of the second quarter of 2009.

Centennial's ratings were placed on Rating Watch Positive owing to the pending acquisition by AT&T. Fitch expects Centennial's term-loan facility to be repaid at the close of the transaction, and will monitor AT&T's intentions with respect to the remainder of Centennial's outstanding debt. Fitch anticipates resolving the Rating Watch status at, or prior to, the closing of the transaction.

AT&T's rating incorporates Fitch's expectations that, on a long-term basis the company has the financial flexibility to maintain leverage in a range appropriate for the current rating category. At the end of third-quarter 2008 (3Q'08), leverage was 1.75 times (x), toward the high end of Fitch's expectations for the rating category and higher than AT&T's target level of 1.3x to 1.5x. Importantly, AT&T ceased repurchasing common stock in 3Q'08, and reduced debt by $3.4 billion in the quarter. Due to the continued stress in the credit and banking markets, the company's current plans are to continue to direct free cash flow toward debt reduction during the remainder of 2008. Fitch notes that the periodic nature of spectrum acquisitions, which are needed to support continued strong wireless growth, has contributed to the temporary higher leverage level. Fitch expects that EBITDA growth and potential debt reduction will return AT&T's credit-protection metrics back into AT&T's target range.

AT&T's ratings also reflect its diversified revenue mix, its significant size and economies of scale as the largest wireless, wireline and enterprise services operator in the U.S., as well as Fitch's expectation that AT&T will benefit from continued growth in wireless operating cash flows. In 3Q'08, wireless segment revenues grew 15.4% while generating approximately 39% of total segment revenues. In order to support the growth needs of its wireless business and to remain competitive in future years through the deployment of fourth-generation wireless technologies, in the first half of 2008 AT&T spent approximately $9.1 billion on wireless spectrum in the 700 megahertz (MHz) frequency band.

Issues to monitor regarding AT&T's ratings include competition in the consumer line of business and the pressure of economic weakening on its lines of business during the remainder of 2008 and in 2009. To offset the effects of these factors on cash flow, AT&T must continue to be successful in controlling costs, achieve merger-related synergies and successfully implement its network-based video strategy.

At the end of 3Q'08, AT&T had $76.8 billion in debt outstanding, and cash amounted to $1.6 billion. AT&T's liquidity is strong. To back its commercial paper program, AT&T currently has a five-year credit facility that expires in July 2011 with an estimated $9.4 billion of availability (Lehman Brothers Bank, Inc. composed $595 million of the original $10 billion facility). The principal financial covenant in both agreements requires debt-to-EBITDA, as defined in the agreements, to be no more than 3x. For the last 12 months ending Sept. 30, 2008, AT&T produced $2.9 billion in free cash flow after dividends. There has been expense pressure on free cash flow in 2008 owing to subsidies AT&T is providing in marketing the latest version of Apple Inc.'s iPhone, but the iPhone's strong sales should contribute to improved revenues and profitability in 2009.

AT&T's debt maturities in 2009 and 2010 are approximately $7.5 billion and $3.8 billion, respectively. The maturities incorporate debt that can be put to AT&T, where appropriate.

Fitch has affirmed the following ratings with a Stable Outlook:

AT&T Inc.

--Long-term IDR at 'A';

--Senior unsecured at 'A';

--Bank credit facilities at 'A';

--Short-term IDR at 'F1';

--Commercial paper at 'F1'.

AT&T Corp.

--Long-term IDR at 'A';

--Senior unsecured at 'A'.

BellSouth Corp.

--Long-term IDR at 'A';

--Senior unsecured at 'A'.

BellSouth Capital Funding Corp.

--Senior unsecured at 'A'.

BellSouth Telecommunications, Inc.

--IDR at 'A';

--Senior unsecured at 'A'.

AT&T Mobility LLC (formerly Cingular Wireless, LLC)

--Long-term IDR at 'A';

--Senior unsecured at 'A'.

New Cingular Wireless Services, LLC (formerly AT&T Wireless Services, Inc.)

--Long-term IDR at 'A';

--Senior unsecured at 'A'.

SBC Communications Capital Corp.

--Senior unsecured at 'A'.

Ameritech Capital Funding

--Long-term IDR 'A';

--Senior unsecured 'A'.

Indiana Bell Telephone Company

--Long-term IDR at 'A';

--Senior unsecured at 'A'.

Michigan Bell Telephone Company

--Long-term IDR at 'A';

--Senior unsecured at 'A'.

Pacific Bell Telephone Company

--Long-term IDR at 'A';

--Senior unsecured v'A'.

Wisconsin Bell Telephone Company

--Long-term IDR at 'A';

--Senior unsecured at 'A'.

Southwestern Bell Telephone Company

--Long-term IDR at 'A';

--Senior unsecured at 'A'.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.

SOURCE: Fitch Ratings

Fitch Ratings 
John Culver, CFA, +1-312-368-3216 (Chicago) 
Bill Densmore, +1-312-368-3125 (Chicago) 
Cindy Stoller, +1-212-908-0526 (Media Relations, 
New York) 
cindy.stoller@fitchratings.com

Battcher was most recently with Delta Air Lines where he served as vice president, corporate communications, responsible for management and strategy of the company's internal and external communications. Prior to his time at Delta, Battcher spent 15 years at BellSouth holding various positions primarily in the area of advertising, public relations, event marketing, regulatory affairs and promotions. During the final three years leading up to BellSouth's merger with AT&T he was responsible for all global internal and external communications and was the primary spokesperson for the company.

Battcher has relocated to the greater Denver area from Macon, Ga. He received his Bachelor of Arts degree in Business Communications from Mercer University.

About Level 3 Communications

Level 3 Communications, Inc. (Nasdaq: LVLT) is a leading international provider of fiber-based communications services. Enterprise, content, wholesale and government customers rely on Level 3 to deliver communications services with an industry-leading combination of scalability and quality, over an end-to-end fiber network. Level 3 offers a portfolio of metro and long haul services over an end-to-end fiber network, including transport, data, internet, content delivery and voice. For more information, visit http://www.Level3.com.

Level 3 Communications, Level 3, the red 3D brackets and the Level 3 Communications logo are registered service marks of Level 3 Communications, LLC and/or its affiliates in the United States and/or other countries. Level 3 services are provided by wholly owned subsidiaries of Level 3 Communications, Inc. Any other service, product or company names recited herein are trademarks or service marks of their respective owners.

Forward-Looking Statement

Some of the statements made in this press release are forward looking in nature. These statements are based on management's current expectations or beliefs. These forward looking statements are not a guarantee of performance and are subject to a number of uncertainties and other factors, many of which are outside Level 3's control, which could cause actual events to differ materially from those expressed or implied by the statements. The most important factors that could prevent Level 3 from achieving its stated goals include, but are not limited to the company's ability to: successfully integrate acquisitions; increase the volume of traffic on the network; defend intellectual property and proprietary rights; develop new products and services that meet customer demands and generate acceptable margins; successfully complete commercial testing of new technology and information systems to support new products and services; attract and retain qualified management and other personnel; and meet all of the terms and conditions of debt obligations. Additional information concerning these and other important factors can be found within Level 3's filings with the Securities and Exchange Commission. Statements in this press release should be evaluated in light of these important factors. Level 3 is under no obligation to, and expressly disclaims any such obligation to, update or alter its forward-looking statements, whether as a result of new information, future events, or otherwise.

SOURCE Level 3 Communications, Inc.

http://www.Level3.com