Cablevision Fills CapEx Gaps


Cablevision Systems Corp. provided some much-needed details regarding its
capital-expenditure reductions aimed at bridging a huge 2003 funding shortfall
in a quarterly filing with the Securities and Exchange Commission, most notably
the reduction of its digital set-top-box contract with Sony Corp. from $1
billion to $138 million.

Cablevision executives went before analysts and investors Aug. 8 to map out
the MSO's plans to meet a $550 million to $1 billion funding gap in 2003. But
the meeting at New York's Waldorf-Astoria was largely thought of as a failure
because CEO James Dolan failed to provide necessary details. That failure was
reflected in Cablevision's stock price, which plunged 16 percent, or $1.28 per
share, Aug. 8.

The stock continued to slide in subsequent trading, hitting a 10-year low of
$4.95 per share Aug. 13.

That downward trend may be reversing -- the stock rose $1.11 per share, or 21
percent, to $6.39 Thursday -- as Cablevision provided at
least some additional clarity in its 10-Q quarterly financial report with the

In that report, filed Thursday, Cablevision said it had renegotiated its
set-top-box contract with Sony, reducing its purchase commitments from $378.5
million in 2002, $378.5 million in 2003 and $567.8 million in 2004 to a total
remaining commitment of $87.5 million in 2002 and nothing thereafter.

In addition, Cablevision would have to pay $50 million for a license for
certain software related to the Sony boxes.

At the analyst conference, Cablevision said only that it had negotiated a
significant reduction in the Sony contract.

In addition, Cablevision said in the 10-Q that its financing plan
contemplates no further funding in 2003 of its direct-broadcast satellite
venture, in which the company invested about $140 million this year.

The company also said its Northcoast Communications personal-communications
service in Cleveland is in technical default, and it does not plan to invest
further in that market.

Earlier, Cablevision said it would cancel a planned New York pilot launch of
the wireless telephone service and that it would either seek a buyer or
strategic partner for the venture.

Cablevision added that its Rainbow Media Group subsidiary would contribute
about $365 million to bridge the funding gap, largely through its $190 million
in cash reserves and roughly $185 million in free cash flow. Cablevision has
proposed taking the RMG tracking stock in house.

Bear Stearns & Co. cable analyst Ray Katz was heartened by the additional

'After last Thursday's meeting, we believe the stock suffered harshly from a
loss of credibility,' he wrote in a research note. 'While the road back may
require a sustained effort, we believe the second quarter's 10-Q filing is a
good first step.'