Insight Boosts Its Own Case With Gains

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CEO Michael Willner declined to comment on the ongoing auction of its remaining assets. But Insight Communications provided some strong evidence Friday for garnering high sale prices, reporting one of its best second quarters in history.

Insight is in the late stages of an auction for its remaining 650,000 subscribers in Kentucky, Indiana and Ohio. According to industry executives, it could attract prices as high as $2.5 billion to $3 billion for the systems in Louisville, Lexington, Bowling Green, and Covington, Ky.; Evansville, Ind.; and Columbus, Ohio.

Earlier this month, Time Warner Cable said on a conference call that it was participating in the auction. Other possible suitors include private-equity firms and smaller operators like Suddenlink Communications.

The auction follows an April agreement to split its assets with 50% partner Comcast. That deal is expected to close by the end of the year.

On a conference call with analysts to discuss its second-quarter results on Aug. 17, Insight said it would not talk about its strategic alternatives and that a review of those alternatives has not been completed. Insight is privately held, but has publicly traded debt which prompts discussions with analysts, and Willner was more than happy to tout its strong second-quarter performance.

“I'm very pleased to be able to do this headline review of our second-quarter results, which turned out to be probably the best second quarter we've ever had as a company, because we combined our record operating performance with record financial performance,” Willner said on the call. He added that the results show that the plan Insight initiated a few years ago to increase operating units to raise its operating leverage “is taking full root now.”

Insight reported that revenue grew 14%, to $355.5 million, and cash flow rose 20%, to $141.4 million. Insight lost about 3,000 basic subscribers in the period — besting its second-quarter 2006 losses of 4,300 basic customers. Digital subscribers increased by 7,700 customers, high-speed Internet subscribers rose by 18,900 and the company added 29,000 telephone subscribers, its best second quarter telephony growth ever.

Insight appeared to buck the recent trend of cable operators reporting big slowdowns in high-speed Internet customer growth. Insight's second-quarter growth was off by fewer than 1,000 customers: last year it gained 19,700 such subs; this year, 18,900. Other larger cable operators — including Comcast, Time Warner Cable and Cablevision Systems — each reported a much larger falloff in high-speed Internet customer growth in the second quarter.

On the conference call, Insight president and chief operating officer Dinni Jain said that the Internet results are probably more of a sign that as the customer base gets larger, the service is more vulnerable to the same seasonal declines found in basic video. Students, for instance, disconnect service when they head home for the summer.

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