Cablevision Continues Cable’s Strong 1Q


Cablevision Systems Corp. continued the trend of strong first-quarter results from cable operators, reporting 17% revenue growth and 18% adjusted-operating-cash-flow growth at its cable systems in the period, while exceeding analysts’ expectations in virtually every subscriber metric.

Cablevision added 38,722 basic-video customers during the quarter (its highest growth since 2000), digital subscribers increased by 164,659 (beating analyst estimates of 105,000) and high-speed-Internet customers rose by 112,289 (beating analyst estimates of 80,000). Voice-over-Internet-protocol telephone customers also rose by 133,967 in the period (beating analyst estimates of about 110,000), ending the quarter with 865,000 voice subscribers.

Overall revenue rose 16% to $1.2 billion and adjusted operating cash flow increased 12% to $396.4 million.

Cablevision also reached other milestones during the quarter -- it is the first major cable operator to achieve 70% digital-video penetration of homes passed, the first to reach 40% high-speed-Internet penetration of homes passed and the first to reach 20% phone penetration of homes passed.

The results even surprised Cablevision executives, who decided to raise guidance for basic-subscriber growth for the full year to 2.5%-3% (from 2%-2.5% previously) and revenue-generating-unit growth to 1.3 million-1.5 million (up from 1 million-1.25 million previously). Cablevision confirmed its mid-teens percentage-growth guidance for revenue and adjusted-operating-cash-flow growth for the year.

“We did better than we even thought we would do,” Cablevision chief operating officer Tom Rutledge said on a conference call with analysts.

Cablevision shares were up 36 cents each to $21.26 in early trading Tuesday.

On the call, Rutledge said the bulk of the new basic additions appear to be coming from direct-broadcast satellite competitors, as the basic growth is outpacing new-home growth in its operating area.

Rutledge also called into question Verizon Communications Inc.’s claims that it has achieved 6.5% penetration for its Verizon FiOS TV video, voice and data service in Massapequa Park, N.Y., a Cablevision stronghold.

He said a recent analysis by Cablevision of Massapequa Park estimated that the operator lost about 200 subscribers in the 8,200-home area. Of those 200 homes, Cablevision won back about 28, he added. That works out to less than 2% penetration for Verizon in that area.

“We don’t believe that [6.5% penetration] number or understand how anyone can argue that they have that number,” Rutledge said on the call, suggesting that Verizon may be counting existing data and voice customers who upgrade to the FiOS video service.

“When we upgraded our cable system to HFC [hybrid fiber-coaxial] architecture and we moved our drops from the old architecture to the new, we didn’t count those as new customers,” Rutledge said on the call. “Taking DSL [digital-subscriber-line] and voice customers and moving them over to FiOS, which is possible, I guess, I wouldn’t count as a new customer.”

He said Cablevision is getting ready to roll out a switched-broadcast service throughout its service territory this year that would primarily allow for expanded foreign-language programming. The service was being tested in Paterson, N.J., earlier this year.

According to Rutledge, using switched-broadcast technology, Cablevision can offer subscribers 60 channels, including 30 channels of Spanish-language programming. Pricing will be $4.95 per month for current expanded-basic customers and $14.95 for basic-service customers.