Mediacom will be serving up a multi-room DVR offering to its customers in the first half of this year, as well as expanding its DOCSIS 3.0 service to 50 percent, or 1.4 million homes, of its footprint.
Mediacom, the nation’s seventh-largest MSO, launched a 50 Mbps tier in nine markets in December, as well as a 105 Mbps tier in two markets.
As for the multi-room DVR service, which will provision simultaneous DVR usage in up to three TVs in a home, Mediacom previously said it expected to have the service available across its entire footprint at some point this year.
John Pascarelli, Mediacom’s executive vice president of operations, said during an earnings call this morning that Mediacom will increase its HD channel offerings from 50 to 75 this year, mainly due to increased bandwidth from its analog-to-digital conversion project. Pascarelli said Mediacom is offering all-digital lineups to nearly 70 percent of its customers after adding another nine markets.
In the fourth quarter, Mediacom said its video revenues rose 2.2 percent, largely driven by growth in its digital video customers and increased uptake for its DVR and HD offerings. Mediacom added 13,000 digital customers to end the quarter with 678,000 subscribers, or a 55 percent penetration rate of its basic subscribers.
For the fourth quarter, Mediacom lost 25,000 basic video subscribers, compared with 6,000 in the same quarter a year ago, and 55,000 for all of last year. Pascarelli and Mediacom CEO Rocco Commisso attributed the basic video losses to aggressive price discounts by DirecTV and Dish Network. Last year, Dish was offering a discount price of $15 per month, while DirecTV’s lowest price was $25 per month.
While not dismissing the losses, executives on the conference call said Mediacom was instead putting more of its effort into attracting and retaining triple-play customers instead of getting into a price war with the DBS providers. Currently, 18 percent of Mediacom’s subscribers are signed up for triple-play bundles.
While the year is still young, Mediacom executives said the early indications were that Dish and DirecTV have backed off their discounted services to some degree.
Year-over-year, the company added 45,000 digital video customers for a growth rate of 7.1 percent. As of Dec. 31, 39 percent of the cable operator’s subscribers were taking DVR, HD services, or both.
In the fourth quarter, Mediacom added 13,000 data subscribers versus 9,000 in the same quarter a year ago. For the year, high-speed data revenues increased 11 percent, mainly due to the addition of 54,000 new data subscribers. Mediacom ended the year with 778,000 data customers for a 27 percent penetration rate of homes passed.
Mediacom will launch a DOCSIS 3.0-enabled 50 Mbps service aimed at small businesses this year, as well as increase the speeds of its other business data tiers by 50 percent.
On the phone side, Mediacom added 13,000 new customers in the fourth quarter, compared with 9,000 from the same quarter a year ago. Phone revenues spiked up 22 percent thanks to a year-over-year increase of 42,000 new customers. Mediacom finished the year with 287,000 phone customers for an 11 percent penetration rate.
On the advertising side, revenues were down 10.2 percent due to the economy and a lack of political ads, but Mediacom said those numbers should improve with increased automobile ads so far this year and more elections.
On the operations front, Mediacom completed a transition to its own e-mail platform in December. The major project this year is the construction of Mediacom’s own internally operated phone platform, which is slated to have its first customers onboard in the fourth quarter this year before finishing the transition in the first half of next year.
Pascarelli said the new phone platform will provide Mediacom with reduced costs that are expected to start occurring in the second half of next year, as well as greater control over its phone service.
For the fourth quarter, Mediacom’s revenues increased 5 percent to $372 million, due largely to a 3 percent year-over-year growth in RGUs and unit price increases. In the fourth quarter, Mediacom added 14,000 new RGUs and 86,000 year-over-year.
For the year, Mediacom’s revenues were $1.46 billion, which was a 5.7 percent per forma increase.
“In the face of extremely challenging economic conditions and heightened video competition, I am pleased to report solid financial results for 2009,” Commisso said. “Healthy top-line growth, together with successful execution of our cost containment and capital investment plans, allowed us to exceed our full-year guidance of $1.30 of free cash flow per basic share as we generated record free cash flow of $1.46 per basic share, or $103 million. This represents a dramatic increase from the $8.8 million in free cash flow we produced in 2008.
“Our operating performance enabled Mediacom to bring debt leverage down to the lowest level since 2000. Moreover, with the financings completed in 2009 amid unsettled credit markets, our financial position has grown even stronger. We extended $650 million of near-term maturities beyond 2016, while maintaining an attractive cost of debt and an abundance of unused credit lines. Not to be overlooked is the value that our $2.4 billion net operating loss carryforwards bring to sheltering future income and free cash flow from income taxes, as demonstrated by Mediacom recording a significant non-cash tax benefit in the fourth quarter.”
Commisso said the success of the company’s cost containment initiative was partially offset by the increasing amount broadcasters are charging for retransmission fees.
“It remains to be seen if the FCC will take care of the consumers like they should,” Commisso said in response to a question about whether the current retransmission and consent agreement policies would be changed.