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The Evolution of Our Success. Sanford Bernstein 19 th Annual Strategic Decisions Conference June 2003. Jim Robbins – President and CEO. Safe Harbor.

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sanford bernstein 19 th annual strategic decisions conference june 2003

The Evolution of Our Success

Sanford Bernstein 19th Annual Strategic Decisions ConferenceJune 2003

Jim Robbins – President and CEO

safe harbor
Safe Harbor

During this presentation, we will be making certain forward looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, about business strategies and goals, market potential, future financial performance, new service and product launches and other matters. These statements address matters that involve significant risks and uncertainties that could cause actual results to differ materially from such statements, including, without limitation, possible changes in expected market acceptance of new products or services, impact of rate changes, ability of vendors to meet contractual obligations, competitive issues, regulatory issues and continued access to capital on terms acceptable to the Company.

Please refer to publicly filed documents of the Company, including the Company’s most recent Form 10-K for additional information about the Company and for additional information about the risks and uncertainties related to the Company.

use of non gaap measures
Use of Non-GAAP Measures

This presentation contains certain non-GAAP financial measures including operating cash flow (also referred to as EBITDA) and free cash flow. For full disclosure of the use of these non-GAAP measures and a reconciliation between the non-GAAP financial measures and the GAAP financial measures, please see our quarterly earnings press release, 10K or 10Q available at www.cox.com/investor.

the evolution of our success
The Evolution of Our Success

Throughout the last eight years, Cox Communications has grown in size, service offerings and wisdom. Although our focus has changed and evolved over time, our overall strategy has remained the same – to deliver long-term shareholder value.

We see tremendous upside across all areas of our business and a bright future ahead. In order to understand where we’re going, it is first important to understand where we’ve been….

the evolution of our success1
The Evolution of Our Success

MOMENTUM

MOMENTUM

1996

1997

2001

2002

1995

2000

2003

The Cox Timeline

A Journey Through the Years

the evolution of our success2

MOMENTUM

MOMENTUM

The Evolution of Our Success

Launch of digital video, high speed Internet and digital telephone

IPO & Acquisition of Times Mirror Cable

Acquisition of TCA Cable TV

Cox embraces 96 Telecom Act

1996

1997

1998

1999

1995

2000

2003

Focus:

Clustering through Acquisitions

Upgrades/Rebuilds

Establish High Standards of Customer Service

Introduce New Services

clustering through strategic acquisitions system profile 1995
Clustering Through Strategic AcquisitionsSystem Profile - 1995

2.6 million basic customers

Ohio:

Cleveland

Coshocton / Newark

New England

Virginia:

Hampton Roads

Roanoke

Lafayette, IN

Omaha, NE

Oklahoma City, OK

Myrtle Beach, SC

Lubbock / Midland, TX

Phoenix, AZ

Middle Georgia

California:

San Diego

Orange County

Bakersfield /

Santa Barbara

Humboldt

Palos Verdes

Pensacola/Ft. Walton Beach, FL

Gainesville/Ocala, FL

New Orleans, LA

Note: Some systems are not shown above because they were subsequently sold, traded or only partly owned by Cox as of Dec. 1995

clustering through strategic acquisitions system profile 2000
Clustering Through Strategic AcquisitionsSystem Profile - 2000

Grew to over 6 million basic customers in 5 years

Kansas:

Wichita

Topeka

Manhattan/Junction City

Southeast Kansas

Salina

Dodge City/Garden City

New England

(includes parts of Rhode Island,

Connecticut, & Massachusetts)

Sun Valley, ID

Cleveland, OH

Oklahoma:

Oklahoma City

Tulsa

Enid

Muskogee

Stillwater

Virginia:

Northern VA

Hampton Roads

Roanoke

Omaha, NE

(includes Council Bluffs, IA)

Arkansas:

Fayetteville/

Springdale

Fort Smith

Bentonville

Russellville

Jonesboro

(+S.W. Missouri)

Las Vegas, NV

North Carolina:

Rocky Mt.

Greenville

New Bern

Phoenix, AZ

Middle Georgia

California:

San Diego

Orange County

Bakersfield /

Santa Barbara

Humboldt

Tucson/Sierra Vista, AZ

Pensacola/Ft. Walton Beach, FL

Gainesville/Ocala, FL

Texas:

Bryan

Georgetown

Tyler

Victoria

West Texas (includes Lubbock, Midland,

Amarillo, San Angelo, Abilene and nearby areas,

+ Clovis, NM)

Louisiana:

Alexandria

Baton Rouge

Bossier City

Lafayette

Lake Charles

New Iberia

New Orleans

network rebuilds upgrades classic cable network in the beginning

HEADEND

Network Rebuilds & UpgradesClassic Cable Network in the Beginning

HEAD END

(Signal Processing Center)

DISTRIBUTION SYSTEM

(Trunk & Feeder Lines)

DROP SYSTEM

(Service Wire & Set Top Terminal)

network rebuilds upgrades a new beginning 1995

750 Homes

HEADEND

Network Rebuilds & UpgradesA New Beginning – 1995

Classic Cable Network – The Cox Way

Ring-in-Ring Redundant Fiber to Nodes Serving ~750 Homes Passed Outstanding Reliability and More Targeted Bandwidth

network rebuilds upgrades the cox way

Node

Ring in Ring

HE

750 MHz

1000 HP

Upstream

Downstream

5 MHz

30 MHz

42 MHz

54 MHz

550 MHz

650 MHz

750/860 MHz

I

m

p

u

l

s

e

Voice

& Data

Svcs

Voice

&

Data

Analog TV

Services

Digital TV

Services

Reserve

Reserve

Two-Way

Two-Way

HDTV,

VOD

Spare

"Broadcast"

Network Rebuilds & UpgradesThe Cox Way

750 MHz of bandwidth serving an average of 750 homes passed is more than enough capacity for our future needs

introduction of broadband strategy more than just a cable company
Introduction of Broadband StrategyMore Than Just a Cable Company
  • Cox embraced the spirit of the 1996 Telecommunications Act by providing competition and customer choice
    • Digital Cable
    • High-Speed Internet
    • Digital Telephone
    • One common back-office platform
the evolution of our success3
The Evolution of Our Success

Launch trial of EOD

Cox Business Services is established

Build out of IP Backbone

MOMENTUM

MOMENTUM

2001

2002

1995

2000

2003

Focus:

Clustering through Acquisitions

Upgrades/Rebuilds

Establish High Standards of Customer Service

Introduce New Services

Focus:

Completion of Rebuilds

Launch of New Services

Development of Commercial Services

early focus on rebuild upgrades largely complete
Early Focus on Rebuild/Upgrades Largely Complete

YE 2003

YE 2000

YE 2001

YE 2002

4%

5%

6%

11%

81%

68%

86%

92%

112,071 Miles

75% Two-Way

114,469 Miles

91% Two-Way

117,479 Miles

96% Two-Way

119,542 Miles

97% Two-Way

<450

550/625

450

750>

From 2000 to 2003, we upgraded over 45,000 miles of plant and built over 8,000 miles of new fiber

new product launches penetration by product
New Product LaunchesPenetration by Product

How high can we go?

From 2000 to 2002, Cox launched digital cable and high-speed Internet to over 4 million homes and launched digital telephone to over 2.5 million homes

Note: Penetration is defined as the number of subscribers divided by ready homes passed by product

new product development commercial services
New Product DevelopmentCommercial Services
  • Launched Cox Business Services in 2000 and today CBS contributes 5% of total company revenues
  • Significant opportunity with over 320,000 businesses within 100 feet of our existing HFC network
  • We are leveraging the residential infrastructure
    • Same NOC
    • Same switches
    • Same trucks, employees, etc.
the evolution of our success4
The Evolution of Our Success

Because we’ve focused on the right things at the right time, we’re powerfully positioned for a competitive marketplace!

The “Sweet Spot”

MOMENTUM

MOMENTUM

1995

2000

2003

Focus:

Clustering through Acquisitions

Upgrades/Rebuilds

Establish High Standards of Customer Service

Introduce New Services

Focus:

Completion of Rebuilds

Launch of New Services

Development of New Services

Focus:

Growth As a Top Priority

Improve productivity and efficiencies

Enhance our Competitive Position

Execution

the sweet spot 1q03 highlights
The “Sweet Spot”1Q03 Highlights
  • Basic subscribers grew 0.6% since 1Q02 and total customer relationships grew 2.0%
  • High-speed Internet additions remain strong with 7 out of 10 customers continuing to choose Cox NOT DSL
  • 780,000 telephone subscribers and 19% penetration to ready homes at the end of 1Q03
  • Digital penetration to basic customers at 30%
    • Continued focus on sell-in to new basic subscribers
the sweet spot product and customer growth
The “Sweet Spot”Product and Customer Growth

1Q03

1Q02

% Change

Total Basic Customers 6,315,950 6,275,390 .6%

Total Advanced Service RGUs 4,219,101 3,059,199 38%

Total RGUs 10,535,051 9,334,589 13%

Total Homes Passed 10,268,146 10,021,979 2.4%

RGUs per Home Passed 1.03 .93 11%

Total Rev. per Home Passed / mo. $ 44 $ 39 13%

We continue to leverage the capital investment in our plant to deliver more services and derive more revenue from every home we pass

growth as a top priority financial performance
Growth As a Top PriorityFinancial Performance

(in millions)

16% Growth

46% Decline

22% Growth

1Q03 EBITDA margins were 35.1%, a 180 basis point improvement over 1Q02

the sweet spot consistently delivering free cash flow
The “Sweet Spot”Consistently Delivering Free Cash Flow

(Millions of Dollars)

Actual

1Q03

Actual

4Q02

Actual

3Q02

Total Operating Cash Flow $ 479 $ 492 $ 453

Capital Expenditures (326) (501) (418)

Cash Increase in Working Capital (32) 105 73

Cash Paid for Interest (93) (85) (118)

Cash Refunded (Paid) for Taxes 2 75 28

TOTAL FREE CASH FLOW $ 30 $ 86 $ 18

We will be free cash flow positive for the full year 2003

growth as a top priority diversified revenue streams
Growth As a Top PriorityDiversified Revenue Streams

Percentage of Residential Revenue

1Q00PF

1Q03

2%

3%

4%

91%

growth as a top priority new product rollout as of 1q03
Growth As a Top PriorityNew Product Rollout as of 1Q03
  • HDTV available to approximately 40% of homes passed
    • Local, premium, Discovery and ESPN content
  • Digital Video Recorder (DVR) launched in Gainesville and Northern Virginia
  • Entertainment on Demand in various stages of launch in four markets
  • Home Networking now launched in 13 markets
improving productivity productivity initiatives
Improving ProductivityProductivity Initiatives
  • Increase field service efficiency and effectiveness
    • Promoting self-installation
    • Multiple product installations on one truck roll
  • Decrease calls into the call center
    • Providing alternatives such as web mail, website FAQ’s, etc.
    • Increasing ease of self-installation and product use
    • Stabilization of HSI network
  • Decrease churn
    • Bundling and sell-in strategies
    • Price/value equation
    • Commitment to quality customer service
improving productivity service calls

Service Call Truck Rolls – All Lines of Business

January February March Total

2002 Pro forma 234,867 219,961 231,447 686,275

2003 Actuals 195,435 163,136 185,216543,787

Difference -17% -26% -20% -21%

Improving ProductivityService Calls

This improvement resulted in 143,000 less truck rolls during the quarter

improving productivity self installations high speed internet
Improving ProductivitySelf-Installations – High Speed Internet

~35%

~15%

2002

2003

Approximately 80% Self-installations in Omaha in 1Q03

improving productivity call volume
Improving ProductivityCall Volume

(Self-Reliance)

The build out and management of our own backbone has increased network reliability

improving productivity we re executing on our goals
Improving ProductivityWe’re Executing On Our Goals

Making Progress

  • Increase field service efficiency and effectiveness
  • Decrease calls into the call center
  • Decrease churn

Improvements in the above areas contributed to the 180 basis point improvement in margin from 1Q02 to 1Q03

control our costs drivers of capital expenditure reduction
Control Our CostsDrivers of Capital Expenditure Reduction

Capex trends…

What it means…

  • Over 90% of our HFC plant is upgraded to 750 MHz or higher
  • Customers are buying their own equipment

- 80% of 1Q03 new High-Speed Internet connects purchased their modem

  • 41% of homes are upgraded to provide telephone service
  • Rebuild and upgrade capital spending is behind us
  • Reduced spending on customer premise equipment
    • Customer growth is driving success-based capital
  • Major capital spending to offer phone service is behind us
competitively positioned bundling is a key advantage
Competitively PositionedBundling is a Key Advantage

Upgrade

Completion

Retail

Distribution

Strategy

Customer

Service

Quality

Cox

Bundling

Strategy

New

Product

Development

Programming

& Content

Competitive

Marketing

bundling drives penetration
Bundling Drives Penetration

(In Thousands)

% = Bundled Penetration to Basic Customers

28%

26%

23%

21%

19%

Bundled penetration in Orange County and Omaha is now above 50%

competitively positioned why phone is important to the bundle
Competitively PositionedWhy Phone is Important to the Bundle

The more products we offer, the more likely our customers are to subscribe to all of our services!

competitively positioned cox versus dbs
Competitively PositionedCox Versus DBS
  • Our fully integrated 3-product bundle is more competitive than what DBS can provide
    • DBS penetration in Cox markets grew more in 2001 than in 2002 despite local into local launches and increased promotional activity
    • 1Q03 DBS penetration in our markets was flat versus 4Q02 at nearly half the national average
    • DBS operators are constrained by bandwidth and lack localism and two-way capability

Only Cox can offer video, voice and high-speed Internet services with the option of one bill

competitively positioned cox versus the rboc
Competitively PositionedCox versus the RBOC
  • DSL providers (most notably SBC) have been using aggressive promotions for the past 9-12 months
    • We have seen no impact on Cox High-Speed Internet run rates - even in California
  • Verizon recently reduced DSL pricing to $34.95 raising questions in investors’ minds

Cox HSI is very competitively positioned:

CoxVerizon

      • Speed - downstream 3 Mbps 1.5 Mbps*
      • Speed - upstream 256 Kbps 128 Kbps
      • Availability 96% 63%

* 1.5 Mbps at best depending on distance from central office

competitively positioned the cox bundle comes out ahead
Competitively PositionedThe Cox Bundle Comes Out Ahead

RHODE ISLAND

VERIZON

COX

Difference

HSI Service $ 29.95 $ 39.95 $ 10.00

(a)Telephone Service 28.95 11.95 (17.00)

(b)Telephone Features included 5.95 5.95

Subtotal (HSI + Phone) 58.90 57.85 (1.05)

(c)Video Service 39.98 40.99 1.01

Bundle Value/Discount (10.00) (10.00)

Total$ 98.88 $ 88.84 $ (10.04)

  • $29.95 Verizon offer requires purchase of telephone package and LD
  • Minimum feature requirement for Cox Bundle
  • Verizon Video represents DISH Network Top 100 plus local channels; Cox Video is standard service (bundled discount does not require digital service in this market)
the evolution of our success5
The Evolution of Our Success

A Journey Through the Years

MOMENTUM

MOMENTUM

1996

1997

2001

2002

1995

2000

2003

Despite our changing focus throughout the years, our strategy has always stayed the same – grow and manage the business to maximize long-term shareholder value

what s in store for the future we ll keep doing what we do best
What’s in Store for the Future?We’ll Keep Doing What We Do Best
  • Continued basic subscriber growth
  • Driving the new and advanced services penetration higher
  • Double-digit growth in revenue and EBITDA through the plan years
  • Improving margins
  • Continued significant declines in capex leading to significant free cash flow generation
    • Expect capex of ~$1 billion in the outer years of our plan assuming mid-teens revenue and EBITDA growth

Our long-term strategy puts us in a great position for future growth

sanford bernstein 19 th annual strategic decisions conference june 20031

The Evolution of Our Success

Sanford Bernstein 19th Annual Strategic Decisions ConferenceJune 2003

Jim Robbins – President and CEO

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