The secret to his success? The secret to how Rocco Commisso became the richest person in New Jersey while leading one of the most successful companies in the country?
That can be summed up with one amazing statistic: When the latest Mediacom earnings came out Wednesday, the company reported that it had grown — for the 100th consecutive quarter.
That’s right: Mediacom, now a private company, has had 100 consecutive quarters of growth.
It’s not clear if that is a record. And there’s no way to compare it to other private companies. But, among public companies, Mediacom officials said they could only find one other company (UnitedHealth) with a longer streak.
This much is clear: Commisso’s 1995 bet on a belief that there was a window of opportunity to acquire, upgrade and interconnect underperforming cable systems in smaller cities and towns across America came true. And his later decision to pivot from cable to broadband access was equally wise.
“Our consistent financial performance over the past 27 years has been a shining example of American entrepreneurship,” he wrote in a letter that accompanied the earnings report. “Mediacom’s most recent achievement is particularly compelling — the final period of 2021 marked our 100th consecutive quarter of year-over-year revenue growth, a remarkable accomplishment achieved possibly by only a handful of companies in the modern history of American business.
“Moreover, since our last major acquisition in 2001, we have organically grown annual revenues from $855 million to over $2.22 billion and annual adjusted (operating income before depreciation and amortization) from $335 million to more than $1 billion.”
From sports fan to owner
Rocco Commisso was born in Southern Italy (Marina di Gioiosa Ionica) before moving to the U.S. when he was 12. He brought a love of football — that is, soccer — with him.
Prior to that, he was the owner of the iconic Cosmos brand.
He said this past performance has the company — headquartered just over the border in Orange County, New York — set for the future.
“Over the long term, these stellar financial results, combined with a keen focus on debt reduction, has culminated in the fortress-like balance sheet that Mediacom enjoys today,” he wrote. “The company’s net debt leverage ratio now stands at 1.2x, among the lowest in the entire media and telecommunications sector.
“I am pleased to report that, in recognition of the absolute strength of our financial position, Standard & Poor’s recently raised Mediacom’s investment grade credit rating to ‘BBB+,’ a rating higher than AT&T — the world’s largest telecom company — and a feat rarely achieved by privately held firms of similar size to us.”
The success has impacted him personally, too. The North Jersey resident has a personal net worth of more than $8 billion, according to Forbes last fall, making him the richest person in New Jersey and among the Top 100 richest in the country.
Commisso reflected on a number of issues in his letter to the community. Here are some of his thoughts:
On the business strategy of concentrating on rural areas:
In 1995, cable systems in smaller cities and towns across America were being divested by larger cable companies in favor of urban markets. At the same time, with the rapid pace of technological change, it was clear to me that rural markets would be at a disadvantage in competing with major cities for economic development and would fail to keep pace in the critical areas of education, health care, public safety and entertainment, unless these communities received the attention and resources of a company like Mediacom.
It was a period before the explosion of the internet when the major regional Bell operating companies, with investment grade balance sheets, were poised to enter the video business, and direct broadcast satellite providers were rapidly growing customers. With stiffer competition looming and small cable properties seen as inferior investments by larger operators, many viewed Mediacom’s rural-focused business strategy with a great deal of skepticism. We stuck with our conviction and made the long-term contrarian bet, proving in retrospect to have been a wise decision. During Mediacom’s first six years, we completed 22 separate acquisitions of smaller market cable systems at very attractive valuations, setting the foundation for steady organic growth over the next two decades
On dealing with the digital divide before anyone really understood what it meant:
From the beginning, and long before government policymakers came to fully understand the extent of the digital divide that still plagues millions of rural Americans to this day, Mediacom made significant infrastructure investments to ensure the residents and businesses in the 1,500 communities we serve have access to world-class services, giving them the tools and technology needed to keep pace with the major metropolitan markets.
To date, we have invested nearly $13 billion to fund acquisitions and make the capital expenditures necessary to upgrade and interconnect a national network spanning 600,000 fiber miles serving 1.5 million customers across 22 states. These investments were virtually all financed with funds sourced in the capital markets or from Mediacom’s operations, rather than through government subsidies relied upon by many of our competitors.
On going public:
During this long journey, we took many bold risks, like going public in 2000 at $19 per share just weeks before the dot-com bust. While the decision to go public meant sharing ownership of Mediacom with public investors, we structured the offering so that I maintained voting control of our company, a critical factor that allowed us the time and latitude to build a solid enterprise. Given the primary focus of the investment community to realize quick returns by flipping companies rather than advancing through steady, long-term growth, keeping control was essential to ensure a long runway to execute our strategic vision.
The IPO and a secondary equity issuance gave us the firepower in 2001 to purchase cable systems from AT&T serving 800,000 video customers, which more than doubled Mediacom’s size. However, this deal was itself a huge gamble, as our net debt leverage ratio increased to 8.3x, and we needed to borrow even more to upgrade these acquired systems without any assurance that this “all in” bet would ever pay off.
On going back to private:
Our boldest move was the decision to take Mediacom private in 2011. For many years leading up to this point, we believed Wall Street had been greatly undervaluing our company. We proactively bought back 24 million shares of Mediacom stock on the open market over a seven-year period starting in 2002, representing 20% of total shares issued and outstanding at the IPO.
Moreover, amid the Great Recession, we acquired an additional 28 million shares in early 2009 from our largest shareholder. Ultimately, all these moves allowed for the completion of the Go-Private Transaction in March 2011 for $8.75 a share. This deal gave me complete control over our company, but it also meant, as owner of 100% of Mediacom, I was taking individual responsibility for $3.7 billion of debt. An undertaking that, as I often joked, made me the most indebted man in America.
This was a pivotal moment for Mediacom. Since the Go-Private Transaction was financed by incurring debt under the company’s revolving credit facilities, our net debt leverage ratio jumped to 6.7x, leaving us with little margin for error. However, our lending partners continued to support us because of the trust I had established going all the way back to my days as CFO of Cablevision Industries in the mid-1980s, with a proven track record of perfect performance in meeting the terms and conditions of $25 billion in debt financings. In the decade since the Go-Private Transaction, we have demonstrated that this trust was well-earned, as Mediacom’s strong growth in free cash flow funded $2.4 billion of debt repayment, reducing our net debt leverage ratio to 1.2x.
On shifting to an emphasis on broadband:
Today, after years of relentless price increases, which raised the average programming costs per video customer to us from less than $14 per month in 2001 to over $76 currently, the number of American households subscribing to the traditional TV bundle from cable, satellite and phone companies has tumbled more than 30% from its peak, as consumers have cut the cord in favor of over-the-top video services.
Luckily, we prepared ourselves for the seismic change in the video marketplace. Our early and substantial investments in broadband technology gave us the opportunity to shift our primary business from providing television services to delivering high-speed internet access. Mediacom’s robust, fiber-rich network allowed our broadband service to easily accommodate customers as they cut the cord of traditional video and embraced OTT viewing. This has only increased consumer demand for faster internet speeds and more than offset the effects of video unit losses. Today, more than 200,000 of our nearly 1.5 million broadband customers are subscribing to our market-leading 1-gig speeds, and more than 40% take speeds greater or equal to 300 Mbps.
On paying taxes … and giving back:
We also make significant direct economic contributions within our markets. Since 2001, Mediacom has paid over $225 million in property taxes and collected more than $700 million of franchise fees for the communities we serve. Our local expenditures for rent, supplies and equipment, the services of contractors and other items we need to run our business add up to many millions more.
Mediacom’s role as a good corporate citizen did not end with simply connecting our communities with innovative communications services. We have provided educational scholarships to more than 2,750 students nationwide since 2001 and raised millions of dollars to support a wide variety of charitable causes. In addition, each year we provide courtesy video and internet services to thousands of schools, libraries and government facilities within our service territory, as well as hundreds of thousands of free public service announcements across our video platform to numerous nonprofit organizations.
On future opportunities:
I am sure it will come as no surprise to (anyone) who knows me well that I am not about to stop pushing forward. There is more to be done. Among other things, we are in the process of rolling out our fixed-wireless service in some of the least densely populated parts of our franchise areas, gearing up to launch 10G services across our footprint and actively evaluating whether a compelling business case can be made for offering a Mediacom-branded mobile-phone service.
We also expect new opportunities and challenges to emerge, because the COVID pandemic has taught us that access to high-speed internet has become a necessity for all Americans. Over the next decade, federal, state and local government agencies are poised to spend upwards of $100 billion on infrastructure programs designed to increase broadband availability and adoption in unserved and underserved communities across the country. As a company that has spent its entire existence focused on serving smaller markets and has already constructed an extensive fiber network to the edge of many areas targeted by this funding, we are perfectly positioned to partner with the government to help eliminate the digital divide once and for all.
On gratitude for his team:
While a successful business strategy, excellent management, bold moves and good decisions have driven Mediacom’s achievements, I owe a great deal to the loyalty, commitment and efforts of the thousands of individuals who have worked for Mediacom over the years.
I am pleased to say that the decision I made in 1995 to bet my life savings and my family’s future on serving neglected small communities in rural America has paid off, not only for me, but also for the thousands of employees and their families whose livelihoods depend on Mediacom’s continued success.
The fact that the members of our senior leadership team have spent an average of 20 years with Mediacom is a testament to the family-oriented culture we have been able to instill within our organization. Even in challenging times like the economic downturn of 2008 and the ongoing COVID pandemic, we stayed true to our values and commitment to our employees, avoiding furloughs and layoffs.
As we begin writing the next chapter for our company, I would be remiss if I did not thank the many advisers, industry colleagues, investors, lenders and vendors that helped us grow and sustain our business for the past 27 years. Most of all, I would like to thank the current and retired members of the Mediacom family. Their dedication to the customers and communities we serve has been the key ingredient to our success.