Cablevision Pushes Data Accelerator

Cable Op Adds Customer Relationships On Data Gains
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Cablevision Systems, less than six months after agreeing to sell itself to Altice Group for $17.7 billion, reported one of its strongest customer relationship quarters in nearly a decade, driven mainly by gains in high-speed data customers.

Cablevision finished the year with 3.1 million total customers, a gain of 2,400 over the prior year, its first year of organic customer relationship growth since 2008. Video customers declined by 10,000 in the fourth quarter and by 43,000 for the full year.

High speed data additions seemed to drive most of the growth, with subscribers in that segment up by 25,000 for the quarter and by 49,000 for the full year. Cablevision has been in the process of transforming itself into a “connectivity” company for the past few years, and has introduced products aimed at younger subscribers who place the speed of the Internet service at a higher priority.

“2015 marked a turning point for Cablevision in several ways,” CEO James Dolan said in a statement. “We increased total Cablevision customer relationships and ended the year with more high-speed data customers than ever before in the nation’s most competitive telecommunications market. Cablevision’s improved operational performance demonstrates our continued execution of strategic initiatives, including competing on value rather than price, providing better products and services, and delivering a superior customer experience. We continue to move full speed ahead towards the completion of our transaction with Altice, and we are proceeding through the regulatory process as expected.”

The improved customer metrics did have a cost though -- consolidated net revenue for the company was down 0.1% to $1.6 billion in the quarter, but rose 0.8% for the full year to $6.5 billion. Adjusted operating cash flow declined 2.1% to $431.7 million in the quarter and was down 3.1% to $1.8 billion for the full year.

Cablevision said that excluding one-time items, AOCF would have been up 1.1% for the quarter.

In a research note, MoffettNathanson principal and senior analyst Craig Moffett noted that while Cablevision beat analysts’ consensus estimates on the subscriber front, it came at the expense of margins, which declined by about 50 basis points from a year ago (although they were still ahead of consensus).

Moffett and other analysts expressed concern about how Altice will manage to keep the subscriber trends positive while slashing costs. In announcing the deal, Altice said it would cut expenses by $900 million over the next several years by applying European business practices and improving efficiencies.

“Altice will have to radically reduce Cablevision’s costs without reversing Cablevision recently stabilized subscriber metrics,” Moffett wrote. “That’s something Cablevision hasn’t succeeded in doing since at least 2012.”