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WOW Loses Subs Across the Board

Alan Breznick
5/24/2013

WideOpenWest (WOW) Networkshas become the latest large U.S. cable-like provider to shed video customers in the first quarter. WOW, a cable overbuilder that now has more video subscribers than all but eight of the nation’s traditional MSOs, reported Thursday that it shed 14,100 basic video customers in the first three months of the year. That decline, which contrasts with a gain of 32,000 video subscribers in the first quarter last year, dropped its total to 690,500. More notably, WOW lost high-speed data and telephony subscribers. That customer base dipped by 1,900 to 706,800 while WOW's phone customer total fell by 10,200 to 432,600. In a conference call with financial analysts, WOW executives blamed the across-the-board subscriber losses primarily on the conversion to a new billing platform in most of the company's markets during the fall, leading to “increased disconnects of past-due customer accounts.” WOW must still carry out the same billing platform conversion with the cable-like systems they took over from another, smaller cable overbuilder, Knology Inc., last July. So there’s more potential for subscriber losses there as well. WOW's revenues slipped to $296.4 million from $298.1 million on a pro forma basis in the same period a year earlier. Its net loss widened to $35.1 million, from $33.9 million on a pro forma basis a year earlier. WOW reported unusually low capital expenditures of $30.4 million for the quarter, down from $32.8 million a year ago. But company executives said they expect capex to “pick up significantly” in the next two quarters as WOW continues to integrate its new Knology properties and upgrade networks and home equipment. For the year, they expect to shell out $215 to $225 million on capex. Why This Matters
WOW officials brushed aside the subscriber losses as a one-time phenomenon. But the video losses are part of a larger pattern. Nine of the top 10 U.S. MSOs and cable overbuilders lost basic video subscribers in the first three months of 2013, as documented by Leichtman Research Group in a new report. Only the up-and-comingSuddenlink Communications bucked the trend (and just barely), adding 700 video customers. Telcos and satellite TV providers continued to gain video subscribers in the first quarter, presumably at cable’s expense, Leichtman analyst Bruce Leichtman noted. But even their gains were lower than in the same period a year ago, likely reflecting a saturated market for pay TV services, the industry’s increased emphasis on higher-value subscribers and the growing impact of Netflix and other over-the-top (OTT) viewing options on the market. Cable subscriber losses will undoubtedly continue in the second quarter, which is typically the weakest period for the industry because of high seasonal disconnects and customer moves. So the question is whether the second half of the year will see any positive changes. — Alan Breznick, Cable/Video Practice Leader, Light Reading

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