Cox sees gains, loss in 3rd qtr.

Cabler sees increase in subs but lost $215 mil

Cox Communications kicked off cable-earnings season Tuesday with a bang, reporting robust growth in high-speed data subscribers along with steady digital cable gains in the seasonally strong third quarter.

Total sales at the Atlanta-based cabler rose 15% in the quarter ending Sept. 30 to $1.46 billion, thanks in part to higher monthly rates for cable and high-speed service. Operating income was up a whopping 46% over the same quarter a year earlier to $161.4 million.

Significantly, operating margins increased during the quarter to 37.2%, which the company attributed to productivity initiatives, while free cash flow grew to $168 million.

Cox nevertheless reported a hefty third-quarter loss of $215 million compared with a net loss of $73 million in the same period last year, due to retirement of some $43 million in debt along with higher costs associated with providing services to its expanded customer base.

Third-quarter results also included a net pretax gain on investments of $43.7 million, mostly from the sale of 13.9 million shares of Sprint PCS stock.

Nearly 170,000 new cable customers

Cable modem adds were the big gainer in the quarter, with 169,290 new customers, a 50% increase over the second-quarter tally for a total high-speed customer base of 1.8 million. Company also picked up 121,744 new digital cable subs to bring its total to 900,000, a 40% improvement over the same period a year ago.

Basic video subs were essentially flat, up just 0.7% to 6.3 million.

Overall, programming and other costs were up 15% to $622.2 million, with overhead expenses up around 5% to $294.5 million.

CEO Jim Robbins, in a conference call with analysts Tuesday, repeated his threat to dump ESPN and/or Fox Sports if negotiations over new affiliate deals turned sour: “We hope it won’t go to extreme measures but are prepared to if we have to.”

Company was bullish for the balance of the year, raising its expectation for operating cash flow growth to 18% for the year, thanks to 14%-15% sales growth and capital expenditures of around $1.5 billion. In the third quarter, Cox reduced its capital spending by just over 8.4% to $382.7 million.

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