Insight Communications Co. Inc. reported disappointing third-quarter results but vowed that a new focus on customer retention and marketing would return the MSO to double-digit growth next year.
Revenue increased 11% in the period to $228.4 million, but operating cash flow rose just 6% -- below most analysts’ expectations -- to $98.5 million.
While CEO Michael Willner told analysts on a conference call that he was disappointed with the results, he added that he believed the MSO has identified the causes of the shortfall and is addressing them.
"I have no doubt that this company is already positioned to return to importantly higher cash-flow growth next year," he said on a conference call with analysts.
Chief operating officer Dinesh Jain -- who assumed that position last month -- said the shortfall in operating-cash-flow growth was due to increased competition from direct-broadcast satellite, a 2,200-customer decline in basic subscribers and a failure to market basic service.
On the competitive front, DirecTV Inc. launched local-to-local service in Insight’s biggest market, Louisville, Ky. -- which represents about 25% of its subscriber base -- at the tail end of the second quarter, at around the same time the MSO was implementing a rate increase.
Jain added that now that that the launch is over, Insight will refocus its marketing on retaining basic customers and concentrating on the cable-value proposition.
"What we have to do is make a change from being builders of this infrastructure to being sellers of multiple services to a diverse customer base," Jain said on the call. "Primarily, that means changing our focus somewhat from being very focused on technology alone to a new focus looking much more at marketing and customer service."
But results won’t likely come this year. As expected, Insight revised its full-year-2003 operating-cash-flow guidance downward from between 11.5%-13% to between 7.5%-8%.
On the bright side, the operator added 23,500 digital subscribers in the quarter, its best performance in six quarters, along with 29,000 high-speed-data customers in the period, its best quarter ever.
Driving digital adds was Insight’s rollout of video-on-demand and subscription-VOD services in most of its markets. Jain said that in the quarter, the digital-disconnect rate was 20% lower, attributable mainly to increased usage of VOD.
He added that VOD buy-rates are up 50% from their low-point earlier this year, and 25% of Insight’s digital customers use VOD. That is expected to continue, especially since the MSO launched SVOD service from Home Box Office, Showtime Networks Inc. and Starz Encore Group LLC in the current quarter.
Insight stock rose 24 cents each to $10.06 Wednesday.