MediaOne Group's domestic cable operations posted 6.5
percent cash-flow growth in the third quarter, while its international operations and its
Time Warner Entertainment stake helped to lift the MSO to an overall 32 percent cash-flow
But at least one analyst said the numbers were
disappointing and below expectations. Salomon Smith Barney Inc.'s Spencer Grimes said
MediaOne's cash-flow report looked like a sign of problems for cable operators in
coming months, as costs for programming and new-service rollouts rise, while MSOs
voluntarily hold back on basic-rate increases and face the possibility that ad-sales
growth will slow.
Grimes cut his rating on Comcast Corp. last Wednesday,
helping to drive down cable-stock prices that day. MediaOne's share price dipped by
$1.13, or 3 percent, to $39, in relatively heavy trading that day.
MediaOne's domestic broadband business, including data
and telephony, posted a quarterly revenue gain of 11.6 percent, to $614 million from $550
million, from the same period a year ago. Core cable revenue rose 8.9 percent, to $601
million. Pro forma subscriber growth was 1.3 percent, to 4.92 million from 4.86 million
last year. Cable operating cash flow rose 6.5 percent, to $263 million from $248 million.
In contrast, MediaOne's 25.5 percent stake in TWE
generated $822 million in revenue, up 12.9 percent, and $210 million in cash flow, up 19.3
percent. Marketing costs for new services cut into MediaOne's broadband cash flow.
Analysts said MediaOne executives told them on a conference
call that the MSO had no plans to block a telephony affiliation between AT&T Corp. and
Time Warner Inc., which owns the majority stake in TWE. Analysts added, though, that
MediaOne executives didn't indicate that any such deal was close at hand.
Time Warner chairman Gerald Levin said recently that his
company would soon announce a deal with a long-distance telephone provider that would pave
the way for local phone service over cable.
MediaOne's biggest new-service gains came from
high-speed-data service MediaOne Express, which now claims 55,000 customers, up 14,000 (34
percent) from June 30.
Overall, pro forma operating cash flow rose 32 percent, to
$500 million from $380 million, and revenue rose 16 percent, to $1.8 billion from $1.6
billion. The company's net loss from continuing operations shrank to $184 million
from $226 million.
MediaOne International's cash flow more than tripled,
to $79 million from $23 million, as revenue rose 35 percent, to $363 million.