News

Price Hikes Coming for Mediacom Subs

2/24/2002 7:00 PM Eastern

Mediacom Communications Corp. subscribers can expect cable rates to go up soon, especially if they are former AT&T Broadband customers with digital service.

Mediacom chairman and CEO Rocco Commisso said last Wednesday that AT&T's digital offering in the four states where Mediacom bought 800,000 subscribers last year was quite popular, achieving a penetration rate of about 29 percent. That's because AT&T launched digital service more than four years ago in some places, as a way of adding channels to systems it hadn't upgraded. Such typically analog-distributed channels as TV Land, Sci Fi Channel and Home & Garden Television are on older AT&T digital packages.

Those are expensive channels to offer on digital, so Mediacom wants to migrate the networks to analog, where wider distribution would make them cheaper on a per-home basis.

"We may be slimming down the [digital] package in some systems" and moving some channels to analog where capacity permits, Commisso told analysts during a call held to explain fourth-quarter financial results.

At any rate, cable prices are going up at all Mediacom systems, especially for digital customers, Commisso said.

Those customers with older AT&T packages can expect to see an increase greater than 10 percent, SunTrust Robinson Humphreys media analyst Gary Farber said in a research note last Thursday. He said Commisso didn't specify how big the digital increases would be, but added, "I think it's going to be sizable."

Commisso said all Mediacom customers would see their bills rise, with most hikes to take effect in March.

The price increases, cash-flow improvements at the former AT&T systems (because Mediacom's overhead is much lower than AT&T's) and new-product rollouts helped Commisso "guide" analysts to 2002 forecasts that Farber put "at the upper end of the expected growth rates of the cable sector" this year.

The forecast for Mediacom in 2002 calls for revenue growth of 10 to 11 percent and cash-flow growth of 16 to 17 percent, Farber said.

Commisso expects digital churn to spike after the price increase, but said that digital growth should pick up during the second half of the year. Mediacom should end up with about as many net digital additions (74,000) as it achieved in 2001 (67,000) on a pro forma basis, he said.

Data additions for the new Mediacom Online — the successor to Mediacom's Excite@Home service —should also pick up speed. Farber estimated 79,000 net data adds in 2002, up from about 49,000 in 2001.

In the fourth quarter, results were as analysts expected: Revenue rose 4.6 percent, to $214 million, and cash flow rose 12.3 percent, to 90 million, year over year.

Commisso and CFO Mark Stephan noted that Mediacom's remaining upgrades are fully funded, as the company has about $1.1 billion in available credit. Mediacom wants to finish its upgrades by June 2003.

March