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CABLESHOW-Wall St warns cable of rising prices

* Cable program fees rising too fast - analysts

* Rising cable bills could invite regulation - Reif-Cohen

* Cable could boost values by focus on customer - Bazinet

LOS ANGELES, May 12 (Reuters) - Wall Street’s top cable TV analysts on Wednesday warned the industry that rising programming costs could eventually do irreparable damage to the valuation of their businesses as the price rises translate to larger and larger cable bills for subscribers.

Program makers had several high profile disputes with several operators since the start of the year including Cablevision Systems Corp's CVC.N recent clashes with Scripps Network SNI.N and Disney DIS.N, while Time Warner Cable TWC.N had a standoff with News Corp NWSA.O.

Cable operators typically blame the rising affiliate fees as the key reason for increases in customers’ bills.

“The rate of programming costs rises has pushed the entry level of for-pay TV to dangerously high levels,” said Craig Moffett, Sanford Bernstein analyst. He was speaking on a panel at the Cable Show, an annual industry event.

“The idea that $80 a month is OK for basic cable is dangerous.”

Moffett and other analysts noted that programming cost increases above the annual rate of inflation were potentially harmful to both cable distributors and program makers.

“At some point the government is going to step in or we’re going to go a la carte,” said Jessica Reif-Cohen, analyst at Bank of America Merrill Lynch.

Reif-Cohen said it was very unlikely the programmers would ever consider lowering prices as a way to help the industry.

The panel agreed that the sector was undervalued by investors considering the wealth of opportunities that lay ahead. These include reclaiming analog bandwidth by converting to all-digital signals, allowing the sale of more products and services through existing infrastructure without the need for extra investment.

The panel also highlighted advanced advertising, selling services to small and medium-sized businesses and wireless backhaul as other key opportunities.

But Citigroup analyst Jason Bazinet said the cable industry had harmed its own valuation by focusing on the next big thing rather than the fundamentals of offering better customer service, thereby losing an increasing number of video customers to satellite and phone operators.

“You all lost sight of your core business. What would get your multiples up? Take care of your customers.”

BROADBAND REGULATION

Most of the cable stocks have fallen more than 10 percent since the U.S. regulator Federal Communications Commission said it was planning to regulate broadband access.

Bernstein’s Moffett downgraded the cable stocks last week in response to the uncertainty around the FCC’s announcement.

Comcast Corp CMCSA.O Chief Financial Officer Michael Angelakis, who was the panel moderator, said the industry would be listening to see if a speech expected from FCC chair Julius Genachowski at the Cable Show on Thursday would settle investors' nerves.

All the analysts agreed that as publicly traded cable companies have started to become profitable and generate cash flow, the best metric for valuation is a multiple of free cash flow rather than earnings before interest, taxes, depreciation and amortization.

Angelakis asked the analysts if they preferred cable companies to return cash to investors through dividends or share buybacks.

“Returning cash through buybacks is the way to go,” said UBS analyst John Hodulik. “Especially with the potential for a change in dividend tax policy.” (Reporting by Yinka Adegoke; Editing by Gary Hill)

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