Mediacom Stabilizes, Sector Gains Subs

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Mediacom Communications closed out
the cable earnings season last week, returning the pay TV sector to more solid
ground with a net gain of about 53,000 customers following
its first full quarter of negative subscriber growth in June.

Mediacom, the last publicly traded cable operator to report
results for the third quarter, said Nov. 8 that it lost
about 13,000 basic subscribers in the period. That was a
slight improvement compared to the 19,000 basic customers
lost in Q3 2009 and, with those results, the five publicly
traded MSOs (Comcast, Time Warner Cable, Charter,
Cablevision Systems and Mediacom) shed a combined
532,000 basic customers in the period.

Those losses were off set by a gain of 439,000 video customers
at Verizon Communications and AT&T and a net
gain of 145,000 customers in the satellite sector.

All together, publicly traded pay TV operators ended
the quarter with a positive 53,000 customers, compared
to a negative 6,000 in the second quarter of this year — the
first-ever negative showing for the sector.

Not everyone was convinced that pay TV losses are a thing
of the past. In a research report issued before Mediacom reported
its results on Nov. 8, Sanford Bernstein cable and satellite
analyst Craig Moffett warned that a positive showing by
the publicly traded distributors could be misleading.

If private companies like Cox Communications, Bright
House Networks and myriad other smaller cable operators
are considered, he estimated, the pay TV sector likely spent
another quarter in the red, with a total loss of about 108,000
customers. And the analyst only expects it to get worse.

“Looking forward, telco TV gains can be expected to slow
sharply, as footprint expansion has all but stopped at Verizon
and is slowing at AT&T,” Moffett wrote. “All else being
equal, that would suggest moderating losses for cable.”

Miller Tabak analyst David Joyce agreed, adding that
once non-public MSOs are added to the mix, the sector
likely had another quarterly deficit.

“You can’t necessarily say people are coming back
to pay TV who may or may not have left,” Joyce said.

That is likely to fuel the cord-cutting debate, but
Moffett believes it is mainly poverty that is driving
basic subscriber numbers down. The biggest declines
seem to be on the low-end tiers, like broadcast
basic.

That thesis seems to be playing out at Mediacom,
where digital subscribers rose by 12,000 in the period,
improving penetration of that service to about
60%. High-speed Internet customers rose by 62,000
in the period, and telephony subscribers increased
by 50,000.

Revenue at the small-market MSO was up just 3%
to $374.4 million, and adjusted operating income
before depreciation and amortization rose 0.7% to
$132.2 million.

On a conference call with analysts last Monday,
chairman and CEO Rocco Commisso said Mediacom
was building for the future by moving forward
with its rollout of DOCSIS 3.0 technology — which
should reach about 50% of its footprint by the end of
the year — and plans to transition its telephony network
from a third-party provider in-house.

With greater DOCSIS 3.0 availability, Mediacom
will be able to roll out higher-speed data services.
And by being in control of its own telephony network
— expected to be completed by the second quarter
of next year — the company will be able to enhance
its existing commercial phone offerings and introduce
new commercial products.

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