Is Cablevision on the Block?


Cablevision Systems Corp. stock reached its highest point in nearly three years Wednesday, fueled by strong fourth-quarter operating results and continued speculation that the MSO could be up for sale.

Cablevision stock was trading at $30.09 per share Wednesday afternoon, up $2.04 each, or 7.27%. Earlier in the day, the stock traded as high as $30.20 each. Cablevision stock last traded in the $30-per-share range in April 2002.

Speculation has been high that Cablevision could sell its cable operations in light of its decision to sell its struggling Rainbow DBS operations and an announcement Tuesday that it would restructure its regional sports networks with partner News Corp.

Cablevision agreed to sell Rainbow DBS’ satellite assets to EchoStar Communications Corp. last month for $200 million. The company reached a deal earlier this month to sell the remaining Rainbow DBS assets to Cablevision chairman Charles Dolan. That deal is expected to be finalized by Feb. 28.

Several analysts have speculated that unloading Rainbow DBS and cleaning up the RSNs could be precursors to an outright sale of the MSO operations.

Cablevision CEO James Dolan wouldn’t talk about specific plans, but he didn’t rule out the possibility of a sale of the MSO.

“With the exiting from the DBS [direct-broadcast satellite] business, we have a great deal of confidence in our ability to operate successfully all of the businesses under the Cablevision umbrella,” Dolan said on a conference call with analysts. “We think they all have bright futures. That does not preclude our ability to do a transaction that would bring even more value to our shareholders.”

Dolan took a similar tack when asked whether Cablevision would seek to sell the Rainbow Media Holdings LLC networks.

“We really don’t have plans at this time to sell the Rainbow networks. We continue to explore strategic potential for them that could involve that, but there are no plans at this time,” Dolan said.

Cablevision reported strong basic-subscriber growth in the fourth quarter -- it added 10,788 basic customers. The Bethpage, N.Y.-based MSO also had strong additions in new services -- digital subscribers rose 145,933, high-speed-data customers were up by 93,517 and digital-telephone customers increased by 83,497 during the quarter.

It was the third consecutive quarter of basic-subscriber growth for Cablevision.

Overall, revenue for the quarter was up 11% to $1.4 billion and adjusted operating cash flow rose 5% to 261.4 million. Consolidated results were mainly impacted by losses at Rainbow DBS, which reported a $449.8 million operating loss and a $190 million adjusted-operating-cash-flow deficit in the quarter.

At its cable operations, revenue increased 14% to $773.5 million and adjusted operating cash flow increased 20% to $304 million.

At its Rainbow networks -- which include AMC, WE: Women’s Entertainment, The Independent Film Channel and RSNs -- pro forma revenue rose 6% to $214 million and adjusted operating cash flow was up 90% to $95.9 million.

Cablevision said it expects cable subscribers to grow 1.5%-2% in 2005, with revenue and adjusted operating cash flow rising at percentages in the mid-teens for the year.