Insight Posts Subscriber Gains

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Insight Communications is separating itself from Comcast Corp. in more ways than one.

Insight, the 9th-biggest U.S. cable operator with 1.36 million basic subscribers, is expected to report operating results today (Nov. 5) that will include a basic-customer net gain of 21,100 in the third quarter.

Privately owned Insight usually does well in terms of subscribers in July-September — when about 14,000 students return to colleges in its markets — but 21,100 was its best-ever basic customer gain in a third quarter, the company said.

Insight’s basic subscriber count of 1,362,100 at Sept. 30 stood 3.3% higher than a year ago.

Insight also said it set records for net high-speed Internet (47,900) and telephone (44,000) customer additions in the quarter, and added 26,100 digital net digital customers, up from 25,000 net adds in the third quarter of 2006.

Revenue rose 14% over third-quarter 2006, to $362.3 million, and adjusted operating income before depreciation and amortization (operating cash flow) rose 15%, to $143.6 million, the company said.

By the end of the year, Insight is expected to sever its Insight Midwest joint venture with Comcast, dividing the subscriber count roughly in half. Insight moves forward with cable systems in Louisville, Lexington, Bowling Green and Covington, Ky.; Evansville, Ind.; and Columbus, Ohio.

The split also means Insight won’t be buying programming at Comcast’s volume discount, but at National Cable Television Cooperative rates, company officials said.

Depending on how contract negotiations go, programming services could be dropped early next year after the split, CEO Michael Willner said. “We’re giving every programmer every opportunity to do the right thing,” he said of those talks.

Comcast on Oct. 25 reported a net loss of 65,000 basic customers in the third quarter, compared with an 11,000 net gain in the 2006 period. Steve Burke, Comcast’s chief operating officer, cited heightened competition from phone companies that have added digital subscriber line-based high-speed Internet service and satellite TV to voice offerings, undercutting Comcast’s triple play.

“That was effective,” Burke said of the rivals’ efforts.

Time Warner Cable, the second-biggest U.S. operator, reports earnings on Nov. 7 is expected by analysts to report about 50,000 basic subscriber losses in the quarter, partly due to difficulties integrating former Adelphia systems and partly due to satellite and telco competition.

In an interview last week, Willner and chief operating officer Dinni Jain didn’t point to any unusual events, positive or negative, in Insight’s quarter, crediting “blocking and tackling” and paying attention to detail at the system level. Company officials are expected to discuss the results with analysts on a conference call Tuesday.

Insight and its financial backer, Carlyle Group, explored a sale option this past spring, but Willner said it never got as far as an auction, though it was reported as such. Either way, he and Jain said the company is being run as if it were going to be under current ownership for years to come.

“Everything we do is about sustainable growth,” Jain said. “There’s no benefit in the competitive world for doing the short-term things that make you look good [for the moment].”

Willner and Jain said Insight competes against bundled-services providers now, including WideOpenWest and Cincinnati Bell, and faces significantly more competition from AT&T after it completes a buyout of BellSouth.

They also said problems in housing markets — which some analysts believe already are having an impact on cable growth — have not had much effect in Insight’s markets, which typically see 1.5%-2% growth in new homes.

About 11,400 of the net new basic subscribers were in “Insight Systems Group,” the segment remaining within Insight.

For more on Insight’s future, see “My Turn,” page 22.

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