Demand for digital cable is pushing up new service growth at Insight Communications, which announced its quarterly financial results last week.
At the end of the third quarter, Insight had a total of 1.6 million revenue-generating units, up almost 11% over last year. Overall, higher interest expense as a result of higher outstanding debt related to systems Insight acquired from AT&T contributed to a wider net loss compared with last year. Insight posted a net loss of $25 million, or 42 cents a share, for the quarter. That compares with a net loss of $16.6 million, or 28 cents a share, last year.
Total sales jumped 48.7%, to $177.4 million, up from $119.3 million last year. Those results include the acquisition of AT&T cable systems in Illinois. On a ?same-store? basis, or excluding those systems, revenue increased 11.1%, and that increase was largely as a result of new service sales.
Including the AT&T systems, operating cash flow grew 47.7% year-over-year, to $80.1 million. Close to 90% of the gain came from the acquired AT&T systems.
Insight saw a slight dip in its operating cash flow margin for the quarter, to 45.2% from 45.5% last year.
But Insight, which has a digital-cable penetration rate of 63.4% of basic subscribers (the highest in the industry), remains a firm believer in digital interactive applications. And digital cable and high-speed data are fueling gains in the amount of revenue per customer Insight Communications takes in each month.
Insight's average monthly revenue per basic subscriber, at $46.46 for the third quarter, was up about 7% over the $43.46 monthly revenue per subscriber last year.
Insight's plan all along had been to finish its upgrades and launch its new services before taking rate increases for its basic services to customers.
?We now feel those systems are primed for basic rate increase policies,? said CEO Michael Willner on the company's conference call.
The gains in digital cable are just phenomenal, added COO/CFO Kim Kelly. Insight added almost 28,400 digital customers, ending the quarter with 229,600.
Insight's mixed results were reflected in the company's somewhat flat number of new cable modem customers. Like other operators, Insight stopped marketing in the weeks following Sept. 11. Insight added 11,600 cable modem customers in the quarter, to end with 84,900. Insight is also still considering its options related to Excite and is analyzing whether it is better to go it alone, partner with AT&T if AT&T is successful in buying Excite's assets or take its ISP operation in-house.
On the telephony front, Insight was delayed in its rebuilding activity because AT&T had to halt provisioning due to work related to the World Trade Center after the attacks. Insight has 3,500 telephony customers in two markets, Evansville, Ind., and Louisville, Ken., and plans to roll out the service in four additional markets.
Insight also said its recent launch of interactive shopping applications in Lexington, Ken., was well received by its customers there, although no specific data on actual sales so far has been released.
Analysts expect this type of application to be more widely deployed by other operators in coming months.
?These types of t-commerce initiatives will continue and will populate the rest of the cable landscape in the next 12 to 18 months,? said David Lee Smith, an analyst at RBC Capital Markets, in a research note.
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