Bucking the tide among midsized and smaller US cable operators, Suddenlink Communications is not shifting away from the traditional pay-TV business.
Suddenlink Communications Chairman & CEO Jerry Kent made that point very clear Friday morning. Speaking on the company's third-quarter earnings call with analysts, Kent stressed that Suddenlink, the seventh-largest cable operator in the US with more than 1.4 million total customers, has no intention of de-emphasizing video to focus on higher-growth areas such as broadband and commercial services -- unlike fellow midsized MSOs such as Cable One Inc. (See CableOne Shrugs Off Video Losses.)
"We have confidence in our video business," Kent stated. "We believe in the video business. We're not giving up on the video business."
The question of Suddenlink's commitment to the TV business came up at least partly because of the MSO's controversial decision to drop Viacom Inc. (NYSE: VIA)'s two dozen cable networks last month, rather than pay the rate hike that the large programmer was seeking for a long-term contract renewal. As CableOne did back in the spring, Suddenlink decided that the Viacom networks, which include such high-profile cable channels as MTV, Nickelodeon and Comedy Central, were not worth the higher programming expenses.
Calling it "price-gouging," Kent said Viacom was demanding a 50% rate hike over the next four years despite lower ratings for most of its networks, a claim that Viacom stoutly rejects. "Viacom is trying to protect an outdated business model," he said. "Our decision was to move away from that outdated business model."
Although Suddenlink officials expected the Viacom network dump to prompt an exodus of video subscribers, Kent said that hasn't been the case so far. While some customers have downgraded their video packages, he said, there has not been a surge in disconnects. "We've seen no adverse effects," he said.
The heated war of words between Viacom and Suddenlink leading up to the breakdown of negotiations certainly didn't seem to hurt the MSO's third-quarter earnings performance. Unlike most other publicly owned cable operators, Suddenlink enjoyed a very solid summer quarter, gaining new subscribers across the board while boosting revenues and earnings by healthy margins.
Specifically, Suddenlink picked up 2,200 video customers in the quarter -- a notable improvement over the 3,200 customers it lost a year ago and its best third quarter ever for video. As a result, the company closed out September with nearly 1.2 million video subs, with about 900,000 subs now upgraded to digital TV packages.
Like most MSOs, Suddenlink did much better on the broadband front. It picked up 33,200 high-speed data subscribers, up from 21,900 a year earlier and also its best third-quarter performance in the category. With that gain, the MSO ended the quarter with more than 1.1 million broadband customers, putting it in position for its broadband sub numbers to pass its video sub numbers sometime in the next year.
With the launch of "Operation GigaSpeed" in August, Suddenlink is now in the process of upgrading nearly all its cable systems for 1-Gig service over the next three years. Under this $230 million capital spending program, the MSO aims to offer top download speeds of 1 Gbit/s to nearly 90% of its broadband customers by 2017 and maximum speeds of 200 Mbit/s to another 8% of its subscribers. Carrying out the program in phases, Sudeenlink started by boosting its max download speed to 50 Mbit/s and is now moving up to 75 Mbit/s, with later increases to 100 Mbit/s, 150 Mbit/s, 200 Mbit/s and beyond planned over the next three years. (See Suddenlink Joins Gigabit Club.)
Kent said Suddenlink, which now delivers broadband service to 37% of its homes passed, has the opportunity to increase its broadband market share significantly. "We do not believe that [37%] is our fair share of the Internet business," he said.
— Alan Breznick, Cable/Video Practice Leader, Light Reading