Hedge fund Halcyon sees comeback for cable

By Herb Lash

NEW YORK (Reuters) - Cable companies will beat out telephone companies in the fight to wire homes with media services, at least over the next 18 months, the chief investment officer of Halcyon Asset Management said on Monday.

John Bader, speaking at the Reuters Hedge Funds and Private Equity Summit in New York, also said Halcyon will soon announce a new fund specialized in structured finance, where there is very little competition.

Bader declined to give details on the new fund, other than to say Halcyon -- a hedge fund with $3.6 billion under management -- expects to hire someone soon to lead the fund and that industrywide the strategy has the capacity to hold more than $1 billion in assets.

Cable stocks, much maligned recently, will benefit from the convergence of the Internet, cable and telephone services, known as the triple play, Bader said.

"The so-called triple play is definitely upon us today. With that said, within the next 18 to 24 months, the cable companies are going to be the beneficiaries of that," he said.

"Going forward, the cable industry will say it was a great five-years, wasn't it?"

Bader, who is also co-chairman of Halcyon, said investors who fear that the commoditization of telecommunications and cable services into the home, the so-called pipe, will kill the industry are wrong.

Cable companies such as Comcast Corp. (CMCSA.O: Quote, Profile, Research, Stock Buzz) and Time Warner Inc. (TWX.N: Quote, Profile, Research, Stock Buzz), in which Halcyon owns stakes, will be the winners, according to Bader.

Bader added that he doubts telephone companies will be able to provide video over telephone lines in the short term, which will make it difficult for them to compete.

Although share prices of cable companies have been decimated, over the next 18 months they will be the business signing up customers.

Bader also said he was interested in Mittal Steel Co. NV's (MT.N: Quote, Profile, Research, Stock Buzz) takeover bid for Arcelor CELR.PA in the steel sector, calling both companies "tremendously undervalued."

And on the exchange takeover front, Bader said he expects the London Stock Exchange (LSE.L: Quote, Profile, Research, Stock Buzz) will be sold and said he would be less than shocked if the New York Stock Exchange, under the new publicly traded company NYSE Group Inc. (NYX.N: Quote, Profile, Research, Stock Buzz) does not bid.

"The LSE will ultimately be sold," most likely within a year, he forecast.