Cox quarter rocks

Sales growth puts cabler back in the black

NEW YORK — Fourth-ranked U.S. cable operator Cox Communications kept up its share of the cable industry’s high-powered digital pace, reporting strong first-quarter cash-flow growth off steady gains in digital cable and high-speed data, along with reduced churn and improved operating margins.

For the three months ended March 31, 2004, Cox sales jumped 13% to $1.5 billion over the same period last year, thanks to gains from new digital service offerings, including high-speed Internet, digital cable and telephony. Company also benefited from price increases on its basic cable service. Operating cash flow jumped 18% to $567.2 million.

Cox cleared $84 million in free cash flow for the quarter and still managed to post a quarterly net profit of $57.7 million compared with net loss of $29.2 million for the first quarter of 2003.

Such healthy gains sparked immediate rumors that Cox is well-positioned enough financially to make a play for bankrupt cabler Adelphia. But CEO Jim Robbins went to great lengths during the company’s Thursday earnings call to insist he’s not interested in making a play for all 5.4 million Adelphia subs.

Targeting markets

Robbins said Cox is only interested in certain well-clustered systems in large and medium-sized markets, rather than simply growing for growth’s sake. Analysts say that might be tough to pull off, unless Cox is willing to launch a joint bid with Comcast and subsequently swap systems.

Cox ended the first quarter with 6.4 million basic video customers, essentially flat over the same period, while digital subs grew 18.7% year over year to 2.2 million. Cox Digital Cable now reaches more than 98% of the homes in its service areas, with 35% penetration of our basic video customer base.

Cabler picked up 161,442 high-speed data subs to end the quarter with just over 2 million broadband customers.

Looking to the remainder of the year, Cox predicted total sales would grow roughly 12% and that the company would be free-cash-flow positive for the rest of the year.

Robbins also noted that programming costs will rise at a slower rate this year than last, when costs for cable program nets were up 12%. With Cox’s new deal for ESPN now in place, management predicted programming costs increases should fall to between 9%-12% in 2004, in line with similar projections by Time Warner Cable and Comcast.

Cox, with the best reputation in the sector for customer service, also said it cut its churn rate by 12% to 4.4% annually in the quarter, thanks to an increased number of bundled video-data customers. Some 38% of Cox subs take at least two of its services.

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