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15 th Annual Smith Barney Citigroup Entertainment, Media & Telecommunications Conference. January 11, 2005.
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15th AnnualSmith Barney CitigroupEntertainment, Media & Telecommunications Conference January 11, 2005
Any statements in this presentation that are not historical facts are forward-looking statements. The words “plan”, “believe”, “expect”, “anticipate”, “estimate” and other expressions that indicate future events and trends identify forward-looking statements. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or those anticipated. Factors that could have a material and adverse impact on actual results are described in the reports and documents Mediacom files from time to time with the Securities and Exchange Commission. Mediacom undertakes no obligation to publicly release the results of any revisions to these forward-looking statements to reflect events or circumstances after today or to reflect the occurrence of unanticipated events. Safe Harbor Statement
This presentation includes the financial measures “operating income before depreciation and amortization,” “unlevered free cash flow” and “free cash flow”, which are not determined in accordance with generally accepted accounting principles (GAAP) in the United States. The Company defines unlevered free cash flow as operating income before depreciation and amortization less capital expenditures, and free cash flow as operating income before depreciation and amortization less interest expense, net and capital expenditures. Any applicable reconciliation of historical non-GAAP financial measures included in this presentation to the most directly comparable GAAP financial measures is available at the Press Releases link in the Investor Relations section of the Company’s website at www.mediacomcc.com. The Company is unable to reconcile operating income before depreciation and amortization, unlevered free cash flow and free cash flow to their most directly comparable GAAP measures on a forward-looking basis primarily because it is impractical to project the timing of certain items, such as the initiation of depreciation relative to network construction projects, or changes in working capital. Use of Non-GAAP Financial Measures
Mediacom Highlights • Growing ARPU and expanding RGU penetration despite intensified video competition • Attractive growth prospects from Video/Data/ Voice triple play • Normalized CAPEX leads to increasing levels of Free Cash Flow • Flexible capital structure with substantial liquidity position
Our Position Today • Fiber-rich broadband network • Regional clusters facilitate new product launches • Future capex mostly success-based • Facing intensified video competition • DBS local-into-local now covers 91% of our markets • Aggressively introducing advanced video products • Widespread rollout of VOD, SVOD, HDTV and DVR by YE 2005 • Redefining and expanding our market opportunity • Continuing growth in RGUs with revenue diversification • Significant opportunities in residential and commercial data • Launching VoIP telephone service in 1H 2005
MN Minneapolis WI IA Cedar Rapids South Bend Moline Des Moines Peoria IN IL Springfield Charleston Carbondale The Power of the ONE Network… Northern Network: 1,500,000 Homes SONET-Ready in 2005 6
GA AL Albany MS Valdosta Mobile Tallahassee Pensacola FL …is Beginning to Demonstrate its Potential Southern Network: 400,000 Homes Northern/Southern Network Reach: 70% of Our Total Homes 7
Growing ARPU Despite Intensified Video Competition Video ARPU $40.23 $43.17 $45.90 $47.20 Total ARPU $44.54 $50.10 $55.75 $58.95 8
Video Service Platform is Complete Availability (% of digital customers)VODDVRHDTV YE03 50% - 70% YE04 65% 98% 77% YE05 (projected) 80% 100% 90% Product Differentiation
Next Year: VoIP Telephony • VoIP: next layer of revenue growth • Completes the “triple play” bundle • Wireless opportunity = “quadruple play” • Strategic alliance with Sprint • Compelling offering to the consumer • Primary line service with unlimited local and long distance • Targeting $40 per month • Seamless and convenient switch • Moderate levels of success-based capex • Favorable return on invested capital Mediacom expects to launch VoIP service in 1H 2005 10
Growth Propelled by New RGU’s Rev/Basic Sub: $35 $59 $81 98% 81% 69% 18% 14% 8% 5% 5% RGU/HP 68% 79% 100% Rev/RGU $34 $40 $43 11
Key Operational Objectives • Redesign/enhance core video strategies • Expand breadth and depth of advanced video services • Strengthen broadband data product line • Prepare for VoIP launch in 1H 2005
Current Core Video Strategy • Customer Acquisition • Re-price and re-package digital offerings • Increasing focus on bundling digital service with VOD/SVOD, HDTV and DVRs • Retention • Selected offers and promotions to retain customers • Greater emphasis on customer care efforts • Communication • Brand and product differentiation • Disrupt/combat negative competitive marketing efforts
Average Cost - 4 Set Household Mediacom: 2 Digital TVs, 2 Analog TVs Satellite: All Digital TVs/No Analog Offered New Digital Packages Close the Gap
Mediacom On-Demand Case Study: North Central Region • 1,200 hours of content • On-Demand Premium Services: Starz, Showtime and HBO included with premium subscription • Value-based packaging • Objectives: • Drive digital sales • Enhance value proposition • Lower digital churn • Generate higher incremental transactional revenues Orders per Month Usage Rates
Regaining the Competitive Advantage Mediacom HD Pack includes: DVR • No equipment to purchase • No contract • HDTV capable • Low entry price ($2.50/month incremental) • Fully integrated with TV Guide • Dual-tuner rollout: December 2004 – January 2005 HDTV • Mediacom equipment is $2.50/month vs. Satellite’s $200 plus in upfront equipment charges • HBO HD, Starz HD, Showtime HD included w/premium subscription • Local Broadcast Channels
Data Strategy • Launching 5MB residential product for heavy users • “Lite” (128k) product introduced in Q2 2004 • Retention tool • Aimed at dial-up market • Commercial business opportunities • Benefits of renegotiated AT&T data contract • Lower per customer costs to Mediacom (including “Lite” product) • Allows for migration to in-house provisioning
Our markets, although smaller relative to peers, are demographically in-line with U.S. averages and offer strong opportunities for increasing data penetration Data Penetration Will Accelerate • Our lower data penetration is largely due to data market launches between two and four years after our peers Data Customer Penetration as of Q3 2004 1 Source: Nielsen Media Research (based on information from U.S. census). 2 Source: IDC (2003). 3 Mediacom estimate based on publicly available information and cable system customer surveys. 18
Mediacom’s VoIP Service Features • Primary line service • Unlimited local and long distance • Targeting $40 per month • Consumers switching to Mediacom’s phone service can: • Keep their existing phone numbers and directory listings • Utilize their existing telephones and home wiring • Access all of the traditional telephone products and services (caller ID, call waiting, call forwarding, etc.) • Take comfort in the stability, security and reliability of facilities-based providers
Sprint Partnership • Strategic alliance utilizes Mediacom’s advanced digital network and Sprint’s national infrastructure and telecommunications expertise • Multi-year agreement with favorable economics • Unlimited usage, any distance, flat rate • Sliding scale pricing to Mediacom • Sprint will assist Mediacom in: • Switching and termination of traffic to the public switched telephone network (PSTN) • Delivery of enhanced E911 emergency service, local number portability, operator and directory assistance • Voicemail and other features • Product development • Opportunity to resell Sprint’s wireless services
Single Platform of Broadband Products RBOC Overlap in Only 65% of Mediacom’s Footprint
Dramatic Improvement in FCF Substantial NOLs Shelter FCF from Cash Taxes $ in millionsG = Guidance
YTD 2004 Peer Comparison Source: Public filings and reports. 1 Excludes Hurricane Ivan related charges.
Flexible Capital Structure Mediacom Communications Corporation Convertible Notes $173 Total Debt/OCF 7.4x Total Debt (excl cnvt)/OCF 6.9x Total Debt: $3.0 Billion Cost of Debt: 6.7% Mediacom Broadband LLC Senior Notes $400 Total Debt/OCF 6.3x Mediacom LLC Senior Notes $825 Total Debt/OCF1 7.0x Mediacom LLCSubsidiaries Senior Debt $656 Unused Credit Commitments2 $486 Senior Debt/SCF 3.1x Mediacom Broadband LLCSubsidiaries Senior Debt3 $965Unused Credit Commitments $431 Senior Debt/SCF 4.3x Notes: Based on Q3 ‘04 data; OCF is annualized and excludes hurricane-related charges. Dollars in millions. 1 OCF for Mediacom LLC includes cash investment income. 2 Proforma for the new credit facility as of 10/21/04. 3 Includes letters of credit and capital lease obligations (net of carve-outs) for bank covenant purposes. 24
New $1.15 Billion Credit Facility • Extended debt maturities • Enhanced liquidity • Greater covenant headroom • Simplified corporate structure and reporting
MCCC Scheduled Debt Maturities Q3 2004 $1,406 Fixed - Floating: 73% - 27% $550 $270.5 $238.5 $220.5 $206 $70.5 $5.5 $40.5 $ in millions Note: Assumes no repayment of revolver outstanding until required by commitment reduction schedule.
Credit Availability • Solid track record of preserving liquidity and maintaining ample borrowing availability 27 $ in millions
Summary • Strengthening competitive video position • Broadening data business with commercial accounts • Seizing VoIP opportunity • Accelerating positive free cash flow