Moody's: Stimulus plan positive for pay TV

Moody's Investors Service said it believes the expected passage of a U.S. economic stimulus plan by the White House will have a positive near-term timing impact on the media industry's most capital-intensive sector: the pay TV industry.

The agency noted, however, that the timing benefit affects only companies that are presently tax payers, meaning only the three largest U.S. cable companies - Comcast Corp. (Baa2), Time Warner Cable Inc. (Baa2) and Cox Communications Inc. (Baa3) - and the two direct broadcast satellite pay TV providers - the DirecTV Group Inc. (Ba2) and Dish Network Corp. (Ba3) - will benefit from the stimulus package.

The plan is expected to encourage capital spending and rewards companies that are typically capital intensive. The agency explained that the manner of reward is by accelerating depreciation (for tax purposes as opposed to GAAP purposes) of capital assets to be purchased in the upcoming period as compared to the typical tax depreciation rates. This results in higher expenses and lower taxable income during the acceleration period when calculating cash tax expenses. Ultimately, such acceleration does not change the overall tax savings that a company should realize on a capital asset, but an acceleration of the timing of tax savings, Moody's said.

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