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Mediacom Boosts Outlook, Preps DTV Tilt

Jeff Baumgartner
8/7/2008
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Shares in Mediacom Communications Corp. jumped more than 10 percent today after the MSO posted a second-quarter profit and bumped up its 2008 revenue and cash-flow outlook. (See Mediacom Reports Q2.)

The MSO also revealed Thursday that it will launch a campaign targeted at consumers in its footprint who still rely on over-the-air video signals but may be ready to give cable a shot before and after the February 2009 digital TV transition.

Mediacom posted net income of $20.9 million (22 cents per share), compared to a year-ago loss of $6.6 million (6 cents per share). Revenues rose 7.6 percent to $349.5 million, thanks in large part to new high-speed Internet and phone customer signups.

Based on the strength of the first half 2008 results, Mediacom bumped up its full-year forecast. It now expects revenue to grow by 7 or 8 percent, compared to 6.5 to 7.5 percent, with adjusted cash flow guidance now expected to grow by 8.5 to 9.5 percent, versus 7 to 8 percent.

Like the larger MSOs, Mediacom was able to keep the bleeding of basic video subs under control. (See Time Warner Cable Eyeing Network DVR Case , Cablevision Begins Wideband Assault, and Comcast Rings the Telcos' Bell .) Mediacom lost 5,000 basic subscribers in the quarter, versus a loss of 18,000 in the year-ago period. The MSO also managed to add 15,000 digital video subs, well above the 2,000 it signed up a year ago.

Mediacom also added 14,000 high-speed Internet subscribers, just ahead of the 13,000 added last year. Its high-end 20 Mbit/s service is offered in 98 percent of its footprint, company chairman and CEO Rocco Commisso noted during a conference call with analysts this morning. Mediacom plans to start introducing faster, Docsis 3.0-based services sometime in 2009.

Mediacom also rang up 18,000 new phone customers, down from the 21,000 it signed up in the year-ago quarter. Mediacom could expand on that figure in the fourth quarter when it starts to introduce a phone product tailored to small- and medium-sized businesses.

Overall, Mediacom added 42,000 revenue-generating units (RGUs) in the quarter, more than doubling its performance a year ago, and extending its total to 2.84 million.

Fall DTV campaign
Mediacom said that in September, it plans to launch a marketing campaign targeting TV viewers who still rely on rabbit ears or roof antennas for TV reception -- about 15 percent of the homes in Mediacom's markets, executive vice president John Pascarelli said. Analysts believe cable operators stand to rake in a substantial number of new subscribers before and after the transition. (See DTV Transition Could Catalyze Cable.)

Mediacom's initial offer for this group will be a bundle of "broadcast basic" video and phone services. "They can always add our introductory high-speed data service to move them out of the dial-up Internet world," Pascarelli said.

In an interesting twist, Mediacom will honor government-issued digital converter coupons "at face value for single-product customers and double the value for double-product households," he added. Each U.S. household can request two $40 coupons toward the purchase of special digital-to-analog over-their-air converter boxes. (See DTV Coupon Clippers .)

SDV slippage
In other digital video-related activity, Pascarelli said the MSO's launch of bandwidth-enhancing switched digital video (SDV) technology may slip from the fourth quarter of this year to the first quarter of 2009, based on availability of new firmware from Gemstar-TV Guide International Inc. (Nasdaq: GMST).

"Given this was a limited deployment, the budgeted dollars and impact on capacity is minimal," Pascarelli said, noting that most of Mediacom's systems are "well on their way" to offering 25 of the most widely viewed high-definition channels to digital subscribers for no added charge. Mediacom is adding or enhancing capacity through a mix of plant upgrades and analog reclamation. The MSO also said digital-terminal adapters (DTAs) could play a role in its all-digital deployments. (See DTAs on Parade .)

Mediacom shares were up 61 cents (10.5%) to $6.42 each in mid-day trading Thursday.

— Jeff Baumgartner, Site Editor, Cable Digital News

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