Robbins Loves Discovery; Kent Eyes Deals1/14/2001 7:00 PM Eastern
A trio of MSOs traveled to Arizona last week to tout their 2001 prospects to Wall Street analysts-and to comment on rumors that have circulated throughout the industry-at the Salomon Smith Barney Global Entertainment Media & Telecommunications conference in Scottsdale.
Cox Communications Inc. president Jim Robbins praised his company's performance in 2000 and revealed some of its strategy for 2001. But before opening the session to questions from the floor, Robbins decided to use the forum to squelch rumors that cable network Discovery Communications Inc.-of which Cox owns 24.6 percent-was on the block.
"We and the other investors in Discovery believe that Discovery networks have terrific growth potential in front of them," Robbins said. "I want to publicly dismiss any speculation that Discovery is for sale."
Sale rumors surfaced last week after a Los Angeles Times
report said Discovery's largest shareholder-49-percent owner Liberty Media Group Inc.-had given the network the green light to seek out a buyer.
Other shareholders include Advance/Newhouse Communications (24.8 percent) and Discovery founder and chairman John Hendricks (1.6 percent).
Robbins also addressed speculation that Cox would exchange its "put" options for Excite@Home stock-currently valued at $1.4 billion-for cable systems owned by AT&T Corp. AT&T, which has voting control of the high-speed-data service provider, had agreed to eventually buy out those options at $48 per share, roughly seven times Excite@Home's current trading value.
Robbins told the audience Cox has had "little complaint" concerning the $7 million return on its original Excite@Home investment.
"We are evaluating a number of options," he said.
Earlier, Robbins revealed Cox's three-part strategy for 2001: The MSO will focus on increasing its revenue-generating units, rolling out digital and data services and setting its business-telephony strategy.
Robbins said Cox had about 1.3 million RGUs-an industry benchmark of subscribers who take either high-speed data or digital service-at the end of the third quarter. It's on track to reach between 1.6 million to 1.6 million RGUs for the fourth quarter.
High-speed-data subscriber rolls are also expected to grow during the fourth quarter to between 240,000 and 250,000 customers and digital-telephony subscribership should also rise. He said Cox expects to expand its telephony-ready footprint to 3. 5 million homes by the end of 2001.
Revenue at business-telephony unit Cox Business Services should double in 2001, as it has for the past three years, Robbins said.
Rapid growth was one goal Charter Communications Inc. CEO Jerry Kent intends to meet this year. He hinted that acquisitions could be one way to continue that progress.
With its system upgrades largely completed, Charter is free to pursue acquisitions, Kent said. But any purchases must make strategic sense and come in either suburban, metropolitan or second-tier markets.
Deals also would have to beaccretive, he said, and the seller would have to be willing to accept Charter stock or a "quasi-equity" instrument in a deal.
"Now we're to the point where the integration process is behind us-obviously we're hitting on all cylinders-we are ready to take on more acquisitions," Kent said. "It would be in the best interests of the company and the shareholders to do that."
Charter already has a significant debt portfolio-it wrapped up a $1.75 billion bond offering last week-and wants to keep debt levels down so it can achieve its goal of an investment-grade credit rating in the next five years.
"We're not going to lever up significantly beyond our current debt levels just for acquisitions," Kent said.
Charter led the MSO pack in 2000, with cash-flow growth rates in the high teens for most of the year. In the fourth quarter, Kent predicted, the company's cash-flow growth would be nearly double that of its peers.
But while growth in 2000 was largely fueled by gains in digital-cable subscribers-Charter finished the year with more than 1 million-this year high-speed data will be the main driver, he said.
As of Sept. 30, Charter reported 185,000 Charter Pipeline customers, growing at a rate of 2,700 per week-higher than its 2,500 weekly target. Charter also plans to introduce advanced services like VOD, interactive TV and IP telephony in the future.
Cablevision Systems Corp., which recently closed on the $1.2 billion sale of its Boston property to AT&T Corp., didn't talk about acquisitions. However, it did say its high-speed-data subscribership increased significantly in the fourth quarter.
Cablevision has made recent news through the possible sale of its Rainbow Media Group programming arm. Speculation grew more intense as the company postponed a planned Jan. 5 shareholders meeting to discuss a Rainbow tracking stock until Feb. 2. That's the third time the company has pushed back that gathering.
Cablevision CEO James Dolan stuck to the company line in his presentation, and said only that the MSO continues to investigate all of its options with respect to Rainbow.
The company also said it added 100,000 subscribers to its Optimum Online service in the fourth quarter, fueled mainly by retail sales at its The Wiz subsidiary. It ended the year with 239,000 high-speed-data customers.