Knology 'whiffed' on price hike

In a refreshing bit of candor, Knology (Nasdaq: KNOL) Chairman-CEO Rodger Johnson said the MSO "whiffed" when it tried to raise prices in the fourth quarter--and it cost them. The MSO posted Q4 revenues that were up 15 percent, to $123.6 million (and up 8 percent to $459.5 million) and successfully completed a $165 million acquisition of Sunflower Broadband, but it also made a move that cost the majority of the 4,500 RGU losses it suffered in its legacy markets.

Essentially, when Knology shut down a special promotion it concurrently raised prices and removed some bundled elements, causing causing prices to spiral even higher. Video subscribers noticed and dropped the service.

"It took us several months to realize we had overshot the mark with our pricing move," Johnson said. "I think we whiffed on our pricing program."

The company has since realigned prices and saw "positive momentum" in the first two months of this year, he said.

Knology also continued its "edge-out" strategy of expanding its contiguous serving and an "accretive tuck-in" acquisition policy. Knology spent $30 million to acquire contiguous cable and broadband operations in Fort Gordon, Ga. and Troy, Ala. from Cobridge.

The acquisitions are indicative of the company's future course, said President M. Todd Holt, noting, "Our balance sheet with its strong liquidity and manageable leverage, along with our robust cash flow and a more flexible credit facility certainly allows us to continue to opportunistically look for accretive acquisitions."

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Related articles:
Customer service key to Knology franchises in Kansas, Alabama
Knology gets a piece of cable action in Opelika
Sunflower Broadband fills several niches for Knology

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