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David Pugliese, VP Product Marketing and Management

Bundling: Our Competitive Engine. David Pugliese, VP Product Marketing and Management. Wachovia Securities 13 th Annual Nantucket Equity Conference. Safe Harbor.

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David Pugliese, VP Product Marketing and Management

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  1. Bundling: Our Competitive Engine David Pugliese, VP Product Marketing and Management Wachovia Securities 13th Annual Nantucket Equity Conference

  2. 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.

  3. Use of Non-GAAP Measures This presentation contains certain non-GAAP financial measures including operating cash flow and free cash flow. For full disclosure of the use of these non-GAAP measures and a reconciliation pf these non-GAAP financial measures with the most directly comparable GAAP measures, please see our quarterly earnings press release, which is posted on our website at www.cox.com/investor.

  4. Cox Communications Profile • 6.5 million customer relationships in 23 states • Larger systems include Phoenix, Orange County, Las Vegas, Omaha, San Diego, New England, etc. • 4th largest cable television provider • Nation’s 12th largest phone company and third largest in California • Regionally concentrated clusters • Leading multi-service broadband provider • Video • Voice • High-speed Internet

  5. What Sets Cox Apart? • Plant upgrades nearly complete • Network is over 90% upgraded to at least 750 MHz • Approximately 96% of homes passed have digital and high-speed Internet availability TODAY! • Ring-in-ring redundant fiber network to the node - crucial for offering life-line phone service • Continued demand for basic and advanced services • Well positioned versus competition • 3-product offering including telephone service • 1st to make bundling strategy a priority

  6. What Sets Cox Apart? • Common platform • Only operator with one fully integrated billing and back-office system across all markets • Committed to customer satisfaction • Highest customer satisfaction among MSOs • Increasing year-over-year growth in revenue and OCF over the past four years • Free cash flow positive for the full year 2003 • Seasoned and experienced management team

  7. Growth As a Top Priority1Q03 Highlights • Industry leading revenue growth of 16% • EBITDA (historical) grew 22% • EBITDA margins at 35.1% up 180 basis points from 1Q02 • $30 million in free cash flow for the quarter • 3rd consecutive quarter of free cash flow

  8. Continue the GrowthSequential Net Gains Per Quarter (in Thousands) 302 296 287 278

  9. What’s Driving Customer Growth? Bundling = Core of our Competitive Strategy Upgrade Completion Retail Distribution Strategy Customer Service Quality Cox Bundling Strategy New Product Development Programming & Content Competitive Marketing

  10. Cox Bundling StrategyService, Simplicity and Savings Customer-Centric Strategy Bundled Offer Strategy Simplicity Service Savings Value for the customer Value for Cox

  11. Key InitiativesEnhancing the Bundle • Video • PVR • VOD/SVOD • HDTV • Broadband enhancements • Cox.Net content • Value-added services • Protection package • Home networking • Xbox compatible • Phone enhancements • Feature development • Unlimited plans • VoIP New Product Development

  12. CONVENIENCE of one provider One-stop-shop for customer service, installation and billing Bundled SAVINGS Better value for the money $10 equivalent on 3-product bundle Consumer CHOICE “Build your own bundle” 1 bill or multiple bills Discount options Incremental penetration Churn reduction Operational efficiencies Competitive advantage The Benefits of Bundling Customer Cox

  13. CONVENIENCE of one provider One-stop-shop for customer service, installation and billing Bundled SAVINGS Better value for the money $10 equivalent on 3-product bundle Consumer CHOICE “Build your own bundle” 1 bill or multiple bills Discount options Incremental penetration Churn reduction Operational efficiencies Competitive advantage The Benefits of Bundling Customer Cox

  14. The One-Stop-ShopCustomer Service, Billing and Installation COX Alternative 1. DBS 2. Dial Up or DSL Provider 3. One fully integrated IT platform makes this possible! RBOC

  15. Bundling- Not Just About Discounts What is Important to the Consumer? % One number to call for customer service 69 One integrated monthly bill 68 For new home, having all the services pre-wired 68 Dealing with just one company 62 A progressive discounting plan: 10% disc. when 59 subscribe to 2 services and 15% with 3 services Customers want convenience! Source: Horowitz Associates, Inc.

  16. Incremental penetration Churn reduction Operational efficiencies Competitive advantage The Benefits of Bundling Customer Cox • CONVENIENCE of one provider • One-stop-shop for customer service, installation and billing • Bundled SAVINGS • Better value for the money • $10 equivalent on 3-product bundle • Consumer CHOICE • “Build your own bundle” • 1 bill or multiple bills • Discount options

  17. Bundling Drives Penetration (In Thousands) Bundled Penetration to Basic Customers 29% 26% 23% 21% 19%

  18. Impact of Bundling on Churn Average Monthly Customer Churn 3.0% 2.2% 2.3% 1.9% 1.4% Video Only Video +HSI HSI + Phone Video + Phone Video + HSI + Phone Bundling reduces churn as much as 50% in 3 product homes!

  19. Bundled Sell-in is Growing 41% 29%

  20. Sell-in Efficiencies • One marketing message • Reduces marketing costs, efforts • One call; one sale • One truck roll • One Bill • Lower churn • Higher take rate on additional revenue streams (long distance, phone features, digital cable)

  21. Marketing the Cox Bundle • Market The Bundle • TV, Direct Mail, Radio, Web, Etc. • Bundled messages drive higher non-customer response rates • Sell the Bundle • Customer contact employees focused on BSI (Bundled Sell-In) • Database Marketing • The right product mix, right offer, etc.

  22. Cox Bundling Vs. DBS Cox is Competitively Positioned • Our fully integrated 3-product bundle provides a competitive advantage versus DBS offerings • DBS operators are constrained by bandwidth and lack of two-way capability • DBS penetration in Cox markets grew more in 2001 than in 2002 despite local into local launches and increased promotional activity • DBS purchase intent declines by 30% among 3-product bundle customers • 1Q03 DBS penetration in our markets was flat versus 4Q02 at nearly half the national average Only Cox can offer video, voice and high-speed Internet services with the option of one bill

  23. Cox Bundling Vs. the RBOCsCox is Competitively Positioned • 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

  24. 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)

  25. What’s in Store for the Future?Continue the Growth • Continued basic subscriber growth • Driving the new and advanced services penetration higher • Double-digit growth in revenue and operating cash flow • Improving margins • Continued significant declines in capex leading to significant free cash flow generation Because of our competitive position and long-term focus, we are well prepared for future growth

  26. Bundling: Our Competitive Engine David Pugliese, VP Product Marketing and Management Wachovia Securities 13th Annual Nantucket Equity Conference

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