Big Ops Produce Mixed Results in Q1


Comcast and Cablevision Systems
kicked off the second wave of MSO earnings
reports last week with encouraging results
in broadband customer additions, but there
was no cause for celebration either.

On the plus side, Comcast continued to
chip away at basic-subscriber losses, shedding
37,000 cable customers in the first quarter,
a 5% improvement over the prior year.
But analysts were expecting a better showing
from the nation’s largest cable operator.


At Cablevision Systems, the story was a little
different. Cablevision actually added 7,000 basic
customers during the period — analysts had
expected losses of about 7,400 customers — but
it came at the expense of financial growth.

Revenue at the Bethpage, N.Y.-based operator
was flat for the period, and adjusted
operating cash flow declined 7.6%, causing
some analysts to worry that the customer
gains were the result of heavy discounting.

While Comcast may have disappointed
some analysts who were expecting it to show
positive customer growth, the nation’s largest
MSO tempered that disappointment with
strong financials. For the cable operations,
revenue increased 5.7%, to $9.6 billion, and
operating cash flow rose 5.5%, to $4 billion.

That was largely driven by a strong showing
in its broadband segment — high-speed
data additions outpaced the prior year, rising
by 439,000 in the period — which off set
slightly worse telephony additions (164,000 vs.
260,000 in the prior year). Comcast cautioned
that the second quarter is usually the more
seasonally weak for cable companies as college
students and snowbirds disconnect service
for the summer as they change homes.

Cablevision had a different dilemma. In its
first full quarter since long-time chief operating
officer Tom Rutledge abruptly left the company
in December, the Bethpage, N.Y.-based
MSO beat analyst subscriber expectations
soundly — its 42,000 additional high-speed
data and phone customers were almost double
consensus estimates – but missed financial
predictions by a wide margin.

The result was a precipitous fall in Cablevision’s
stock price — it finished down 7.9%
($1.16) to $13.54 on May 3 — as analysts’ questioned
whether the MSO has sacrificed financial
growth for short-term subscriber gains.

Sanford Bernstein cable and satellite analyst
Craig Moffett added that the biggest surprise
wasn’t that results were sloppy, but that anyone
could have expected anything different.

“This is a company that has lost its president,
its COO, its heads of marketing, technology, and
ad sales, its one-time CFO, and a host of others
in recent months,” Moffett pointed out. “It faces
more competition than anyone in the business,
has already squeezed most of the juice out of its
territory with ultra-high penetration rates for all
services, and it hasn’t taken a price increase this
year, leaving it levered almost entirely to subscriber
growth in a saturated market.”


Cablevision CEO James Dolan said on a conference
call with analysts that some management
changes were “inevitable as we continue
to grow and transform the company,” adding
he didn’t anticipate a hiring spree.

Cablevision has said 2012 will be a year of investment
for the MSO, and the first-quarter declines
were, in part, a result of its decision to
dedicate more resources to its infrastructure.