The Day After: Cablevision Posts Strong 1Q
Subscriber-Growth Metrics Weak Due to High Penetration Rates
By Mike Farrell -- Multichannel News, 5/3/2007 8:49:00 AM
One day after its ruling Dolan family’s deal to take the company private was approved by a special committee of independent directors, Cablevision Systems reported first-quarter results that were strong in financial growth but showed some weakness in subscriber-growth metrics, mainly because of the cable operator’s unusually high penetration rates.
Cablevision reported overall first-quarter revenue growth of 12% to $1.6 billion and adjusted-operating-cash-flow growth of 21% to $482 million. Fueling that growth was strong financial performance at its cable systems (where revenue rose 15.4% to $1.1 billion and adjusted operating cash flow increased 12% to $414.1 million) and better-than-expected results at its Madison Square Garden and Rainbow Media Holdings units.
At Rainbow’s core networks -- AMC, The Independent Film Channel and WE tv -- revenue increased 9% to $158 million in the quarter and adjusted operating cash flow rose 29% to $79 million, spurred by a 16% increase in advertising revenue and a 4% increase in affiliate revenue.
At MSG -- which includes the New York arena, regional sports network Madison Square Garden Network, Radio City Music Hall and three professional-sports teams -- revenue rose 5% to $235.6 million and AOCF more than doubled to $18 million driven by additional concert and sporting events and higher MSG Network revenue.
Cablevision CEO James Dolan declined to comment on his family’s $10.6 billion offer to take the company private, which was approved by a special transaction committee of independent directors Wednesday.
“Obviously on behalf of the Dolan family, we were very pleased to reach an agreement with the company,” Dolan said on a conference call with analysts to discuss first-quarter results. “The process has now begun and, while it is too early for us to address the questions we know you have, rest assured we will be available to address those questions at the appropriate time.”
Dolan did not say when that time would be.
At the cable operations, Cablevision added 65,000 digital-cable customers (down from 164,659 added in the first quarter of last year), 78,000 high-speed-Internet subscribers (down from 112,289 last year) and 109,000 telephony customers (down from 133,967 last year).
That slowdown was expected given Cablevision’s industry-leading penetration rates in all three metrics -- its digital penetration rose to 80% in the quarter, high-speed-data penetration was 46% and telephony penetration was 29%, all tops in the industry.
Also in the quarter, Cablevision added 12,000 basic-video customers, down from 38,722 last year -- its 12th straight quarter of basic additions.
The slowdown in advanced-service-subscriber additions also meant lower capital expenditures for the period. Capex for the first quarter was $140 million for the cable operations, $118 million lower than the same period last year. That lower capex translated into higher free cash flow -- cash flow after capital expenditures and interest payments are made -- of $81 million in the period. Cablevision reported a $105.5 million free-cash-flow deficit in the first quarter of 2006.
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