Cablevision on Rise - Multichannel

Cablevision on Rise

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Cablevision Systems continued to buck the cable-industry trend by reporting a gain of more than 1,000 basic customers despite growing competition from Verizon’s FiOS TV and Internet services in its New York City-area territories.

Cablevision said on Feb. 28 it added 1,155 basic video subscribers in the fourth quarter of 2007, despite competition from Verizon Communications’ FiOS video service.

<p>Snapshot: Cablevision’s Q4</p><p>A gain in basic subscribers bucked industry trends:</p>

Revenue

$1.2 billion

Adjusted Operating Cash Flow

$497 million

Basic Subscriber Gains

1,155

Digital Subscriber Gains

43,000

High-Speed Internet Subscriber Gains

62,000

Telephone Subscriber Gains

102,000

Other cable operators have blamed competition from telcos led by Verizon and from satellite-TV providers for their basic subscriber declines.

For the full year, basic subscriber growth was flat. Even that’s a stark contrast to bigger cable providers. Comcast, for example, subtracted more than 180,000 subscribers in 2007; Time Warner Cable lost 144,000 and Charter Communications lost 116,300.

Sanford Bernstein cable and satellite analyst Craig Moffett said that while Cablevision was widely expected to report basic subscriber growth, having led the industry in that category for the past several years, “it nevertheless represents a clear positive surprise versus expectations which have been persistently bearish in terms of long term subscriber retention.”

Verizon, with about 1 million FiOS video customers nationwide, has been particularly aggressive in Cablevision’s territory, adding 820,000 video passings in 2007, bringing its total marketable video passings in that area to 980,000, Cablevision chief operating officer Tom Rutledge said on a conference call with analysts.

Verizon doesn’t break down where its FiOS customers are, but the telco has been particularly aggressive in obtaining video franchises in Cablevision core markets on Long Island and in Westchester and Rockland counties north of the city.

For the quarter, cable-system revenue increased 8.6%, to $1.2 billion, and adjusted operating cash flow rose 13.3%, to $497 million.

Cablevision added 43,000 digital-video customers in the quarter, raising its digital penetration to an industry-leading 84%. It also gained a net 62,000 high-speed Internet customers, boosting penetration to 49% of homes passed, again tops in the industry. And it added 102,000 Optimum Voice phone customers.

Cablevision said Optimum Voice service is taken in 34% of homes passed, more than any other cable company.

The results led to a bump in Cablevision’s share price Thursday: The stock closed at $27.90 each on Feb. 28, up $1 per share, or 3.7%.

The Rainbow Media Holdings national networks — AMC, IFC and WE TV — saw revenue rise 12% in the period, to $179 million, and adjusted operating cash flow decline 5%, to $80 million.

On a call with analysts, Rainbow CEO Josh Sapan blamed the expected cash flow decline on increased film license fees and higher programming costs associated with its new original series.

For the year, Rainbow reported revenue growth of 11%, to $669 million, and adjusted operating cash flow rose 14%, to $308 million.

The New York Post reported on Feb. 25 that Cablevision had asked investment banker Bear Stearns to evaluate the Rainbow unit for a possible sale. On the call, Cablevision CEO James Dolan declined to comment on speculation in the marketplace.

“We feel strongly about our programming services,” Dolan said. “They’re doing very well particularly this year with the new programming they’ve added. We think they still work really well.”

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