Cablevision Reports Strong 3Q


As expected, Cablevision Systems management ignored the elephant in the room during its third-quarter earnings conference call with analysts -- the $7.9 billion proposal by its ruling Dolan family to take the company private.

But despite the lack of additional information on the proposed buyout, the Bethpage, N.Y.-based cable operator turned in another strong quarter of growth.

Overall, revenue rose 13.4% to $1.4 billion and adjusted operating cash flow was up 16% to $438.8 million. At the cable operations, performance was even stronger: Revenue rose 18.7% to $1.04 billion and AOCF increased 17.5% to $397.6 million.

Cablevision added 9,756 basic customers during the period, its 10th consecutive quarter of basic-customer growth. Digital subscribers rose by 93,587 (boosting penetration to an industry-leading 76%) and high-speed-Internet customers increased by 72,438. The MSO’s Optimum Voice telephony offering had another strong quarter of growth, reporting 113,086 customer additions during the period.

Despite the strong performance, Cablevision stock slipped 3 cents per share in early afternoon trading Wednesday to $27.90 each, still well above the Dolans’ offer price of $27 per share.

On the conference call, Cablevision chief financial officer Mike Huseby stressed that the company would take no questions during the standard question-and-answer portion of the call regarding the Dolan family offer or any litigation involving the company.

That last part mainly referred to the lawsuit filed by several programmers last year claiming that Cablevision’s plan for a network-digital-video-recorder service -- dubbed the Remote Server DVR -- violated copyright laws. That case is awaiting a summary-judgment ruling by U.S. District Court Judge Denny Chin.

On the call, Cablevision chief operating officer Tom Rutledge said that while the RS-DVR case is pending, Cablevision is selling physical DVRs to customers and it is “an integral part of the business strategy.” He declined to quantify how many DVRs Cablevision has deployed.

While most analysts believe the Dolan family will have to raise their price -- perhaps above $30 per share -- if they want the going-private transaction to be approved by Cablevision’s special committee of independent directors, some wondered how the company will fund a higher offer without violating existing debt covenants.

One way to do that would be to sell off all or some of its Rainbow Media Holdings programming networks and Madison Square Garden, which could pump another $4 billion-$5.5 billion into company coffers.

On the conference call, Cablevision CEO James Dolan offered little insight into any plans to sell Rainbow assets.

“We are, as always, looking for strategic options that enhance those assets. We consider them very important to the overall strategy and to the entire group of assets we own,” Dolan said on the call.

Rutledge also disputed claims that Cablevision’s success in deploying advanced services has more to do with its affluent New York metropolitan area footprint than superior execution.

“Our penetration in the Bronx is better than any MSO’s national penetration in every service category,” Rutledge said. “Demographics do impact penetrations. But, in general, even in our weakest-performing areas from a financial perspective -- in other words, the poorest communities we serve -- we exceed the average national penetration in every product category of all the publicly traded MSOs.”