Cable Operators

Cox Touts Takeaways From Satellite Services

8/18/2006 8:00 PM Eastern

Privately owned Cox Communications Inc. held a conference call about its finances Aug. 15, but told investors that it wasn’t a signal the Atlanta-based cable company was entertaining thoughts of selling stock to the public again.

On the call, moderated by UBS debt and equity analyst Aryeh Bourkoff, Cox CEO Patrick Esser said he wanted an opportunity to give investors another perspective on cable’s growth opportunities and the success of the three-product bundle.

“In my prepared comments, I said I don’t plan on doing a lot of these [conference calls],” Esser said. “I will keep that promise. We haven’t done one of these in two years but I thought so much was going on in the business and so many questions were being asked of us, this is a good way to get answers out into the market to do that. No, I don’t know of any plans for Cox Enterprises Inc. to take Cox Communications public. That would be a surprise to me.”

Esser also tried to deflate any speculation that the operator was contemplating a major acquisition.

“We could be opportunistic where we could expand our presence in a market here or there,” he said. “It is a balancing act for us of A: paying down the debt and B: giving our customers the products and services that we promised.”

Cox Enterprises took Cox Communications private in a $4.9-billion deal in December 2004. The company stopped filing quarterly financial after the 2005 10-K annual report was filed in March 2006, mainly because it has fewer than 300 shareholders, the minimum requirement to file financials with the Securities and Exchange Commission.

The company hasn’t held a conference call with analysts since the second quarter of 2004.

Esser said Cox is recapturing direct-broadcast satellite customers at an accelerated rate, the percentage of new basic-customer connects coming from DBS service providers rising to 11% from 6% two years ago.

He also said Cox has added about 84,000 basic customers since July 2005. That would mean roughly 9,200 of those new customers ditched their dishes. Cox did not release quarter-to-quarter basic subscriber changes, the metric most cable operators use.

Esser said the bundle of video, high-speed Internet and telephony cuts churn substantially, and customers that take at least two products in the bundle are 41% less likely to switch to a different provider. About 70% of Cox telephone customers take all three products, he said.

He deflected questions as to whether Cox would seek to sell its 25% stake in Discovery Communications Inc. Liberty Media Corp. owns 50% and Advance/Newhouse Communications owns 25% of Discovery.

“We are happy with our Discovery investment,” Esser said, adding the top priority for Discovery is to find a new CEO and a new chief financial officer. Discovery CEO Judith McHale is leaving the programmer in December.

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