Cox Communications Inc. reported strong revenue and cash-flow growth in the
second quarter, prompting the Atlanta-based MSO to revise its year-end guidance
Revenue for the second quarter was up 14% to $1.4 billion and operating cash
flow rose 20% to $532 million, fueled by digital-cable, high-speed-data and
Cox also reported $126 million in free cash flow -- operating cash flow after
interest payments and capital expenditures are made -- its fourth consecutive
quarter of doing so. In the first half of the year, Cox generated about $156
million of free cash flow and reiterated its guidance of posting positive free
cash flow for the full year.
For the period, Cox added 69,100 digital-cable subscribers, 112,452
high-speed-data customers and 56,170 telephony subscribers.
Cox added that about 31% of its customers take at least two products in the
three-product bundle of video, voice and data.
That prompted Cox to raise its 2003 operating-cash-flow guidance to between
17%-18% from between 15%-16%. Full-year revenue guidance, previously at between
14%-15%, was unchanged.
However, basic-subscriber guidance was reduced to just under 1% for the year
from the previous target of 1%, mainly due to larger-than-expected basic losses
in the period. Cox said it lost 37,492 basic customers in the period compared
with a gain of 35,101 basic subscribers in the first quarter.
While several regional Bell operating companies have announced aggressive
pricing for their own high-speed-data product, digital-subscriber-line service,
Cox said it has not had an impact yet.
SBC Communications Inc. -- which announced a video alliance with EchoStar
Communications Corp. earlier this month -- had its best quarter ever for DSL
growth in the second quarter, adding 304,000 customers in the period. About 40%
of Cox’s footprint is in SBC territory.
Verizon Communications -- the territory of which covers about 18% of Cox’s
homes passed -- had slower-than-expected DSL growth in the second quarter,
adding about 101,000 customers in the period.
Cox executive vice president of operations Pat Esser said on a conference
call with analysts that the MSO’s high-speed-data growth increased 32% in
Verizon markets and 18% in SBC markets.
The MSO said the reason for the higher subscriber losses was mainly
seasonality as college students left school and 'snowbirds' left their homes for
To illustrate that point, senior VP of marketing Joe Rooney said
high-speed-data connections -- up about 50% year-over-year -- were significantly
higher in college towns like Manhattan, Kan. (up 70%); Gainesville, Fla. (up
120%); and Phoenix (up 93%) as the school year began.
Rooney added that high-speed-data connections in Gainesville were four times
the normal monthly connection rate last August. In May, disconnects in
Gainesville were three times the normal monthly rate.
Despite the growth, Cox stock fell 33 cents per share Wednesday to $32.34.