Adelphia Adds Digital, HSI Subs

5/02/2004 8:00 PM Eastern

A week after putting itself on the auction block, Adelphia Communications Corp. reported mixed results for the month of March, with cash flow and basic subscribership down, but digital and high-speed Internet customers rising.

Cash flow for the period dropped 16% on a sequential basis, to $82.4 million from $98.1 million, mainly because of higher marketing and programming expenses. Cash flow margins (cash flow as a percentage of revenue) also dipped during the period, to 25.5% from 30.4%.

Revenue for the month was flat at $322.8 million, compared to $323 million in February.

Basic subscribers were also down for the month — by about 10,708 customers — to 5.41 million from 5.42 million in February, but losses were less than in previous months. In February, Adelphia lost 14,331 basic subscribers. The Denver-based MSO lost 29,636 basic customers in January.

Adelphia files monthly operating reports at the U.S. Bankruptcy Court for the Southern District of New York. Adelphia first filed for bankruptcy court protection in June 2002.

On April 22, under pressure from creditors upset with its reorganization plan, Adelphia agreed to consider a sale of the company as a whole, in conjunction with its efforts to exit bankruptcy.

While basic subscribership declined, Adelphia's strategy of focusing more on high-end subscribers appears to be paying off.

Adelphia added 10,708 digital subscribers in March — the first increase in digital customers since the MSO began repackaging and repricing the service late last year. Adelphia finished the period with 1.95 million digital customers. High-speed Internet subscribers rose by 43,160 customers to 1.14 million.

In a research report, UBS Warburg cable debt and equity analyst Aryeh Bourkoff said he expected even further improvement in digital additions in the coming months, as the repricing plan nears completion.

While Adelphia has not announced plans for advanced digital services like digital video recorders and HDTV, he added, one change the company made in its accounting could point to plans for a future rollout.

Bourkoff said Adelphia changed the depreciation policies for its set-top boxes, decreasing the estimated life of the units, which in turn increased depreciation for the equipment in March to $155.5 million from $76.5 million in February.

"We believe the change in set-top box lives may reflect the company's view on the deployment of advanced services," Bourkoff wrote. "At this point, we do not anticipate an announcement for rollout of these services in the near term, but we do believe Adelphia is testing the advanced services on a trial basis in a few markets."

Adelphia Subscriber Data
March February Change
Source: Adelphia Communications Corp.
Basic Video 5,415,1095,425,817-10,708
High-Speed Internet1,142,8911,099,89143,000

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