Video services

Knology Sheds Voice & Video Subs

Cable overbuilder Knology Inc. (Nasdaq: KNOL) lost a chunk of video and phone customers in the second quarter, attributing the reduction to typical seasonal "softness" coupled with a lack of promotional firepower.

On the video front, West Point, Ga.-based Knology lost 3,980 subs, giving it a total of 230,086. In comparison, the competitive cable MSO added 2,258 subs in the year-ago quarter.

While "incumbent" MSOs such as Comcast Corp. (Nasdaq: CMCSA, CMCSK), Cablevision Systems Corp. (NYSE: CVC), Time Warner Cable Inc. (NYSE: TWC), and even fellow overbuilder RCN Corp. continued to add voice subs, the same wasn't true for Knology, which lost 2,313 telephone "connections" in the second quarter. Knology added 2,474 phone subs a year earlier. (See Comcast Rings the Telcos' Bell , Time Warner Cable Eyeing Network DVR Case , Cablevision Begins Wideband Assault, and RCN Posts Q2 Results.) Knology noted that some of the phone subscriber defections were due to customers terminating landlines and shifting to wireless as their primary voice-service platform.

Knology, however, managed to add 831 residential high-speed Internet customers, and is still seeing growth from its business services arm, which added 3,474 connections during the quarter. The company's average revenue per user (ARPU) in the second quarter was $50.91, bettering ARPU of $48.90 a year earlier.

Knology said a marketing plan devoid of promotional offers appeared to be one of the key reasons the company lost video and voice subs in the second quarter.

"This softness was not caused by churn," said Knology chairman and CEO Rodger Johnson during the company's earnings call Monday morning. "Rather, what we have seen is a slowing in the acquisition of new residential customers. While some of this is a product of the macroeconomic environment… the largest contributor was a decision on our part not to offer any discount promotions in the first quarter or the first half of the second quarter."

On the financial front, Knology's revenues rose to $102.1 million, versus $91.6 million in the year-ago period. Those results, however, included revenues coming in from Knology's acquisition of Graceba Total Communications in January 2008.

The operator also posted a net loss of $4.0 million (11 cents per share), narrowed from a year-ago net loss of $33 million (94 cents per share), which included the early extinguishment of debt tied to the financing of Knology's purchase of PrairieWave Communications.

Knology shares were down 83 cents (7.66%) to $10.00 each in mid-day trading Monday.

On a personnel-related note, Knology's CEO confirmed this morning that he plans to stay with the company for the long term. "I still feel like we have a lot of wood to chop here at Knology. I am not going anywhere," Johnson said.

— Jeff Baumgartner, Site Editor, Cable Digital News

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