Cablevision Says Sub Growth Will Slow

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Cablevision Systems reported another quarter of strong results, saying revenue at cable operations rose 17.9% and adjusted operating cash-flow rose 15.1%. But basic-subscriber growth — tops in the industry — should slow this year as penetration levels have reached their highest figures in five years.

Cablevision added 16,000 basic subscribers in the fourth quarter — that's 11 consecutive quarters of basic-customer growth — and ended the year with 3.1 million customers, up 3.3% over 2005.

In the quarter, Cablevision added 83,000 digital cable subscribers, 75,000 high-speed data customers and 108,000 telephone customers.

Cablevision officials said during a Feb. 27 conference call with analysts that digital growth should slow down in 2007, as the company has obtained an industry-high 78% penetration rate for digital cable.

The New York City-area cable operator also said basic-subscriber growth should slow in 2007, to between 1% and 2% for the full year. Cablevision's basic penetration is about 68.5% of homes passed, the highest level since 2001, when basic penetration was 69.4%. Revenue and cash-flow growth percentages should be in the mid-teens in 2007, the company said.

On the call, Cablevision chief operating officer Tom Rutledge said future revenue growth at the cable systems will likely be tied more to telephone and high-speed Internet service subscribers, rather than digital video.

A slowdown in digital additions would have a positive effect on capital expenditures: capex is expected to be $600 million to $650 million in 2007, below 2006 capital outlays of $777 million.

Rutledge said that the company expects strong growth in business services in 2007. While the company offered no revenue guidance on business data and telephone services, Rutledge said that Cablevision's existing plant passes more than 600,000 small and medium-sized businesses.

“We are very excited about the opportunity,” Rutledge said. “There are 600,000 businesses that we pass; we have been aggressively and actively marketing them and getting traction in the marketplace.”

Rutledge also tried to calm fears about mounting competition from Verizon Communications, which has secured several video franchises in Cablevision territory.

While Verizon has activated about 850,000 homes passed in Cablevision's 4.6 million subscriber footprint to its fiber-based FiOS network — about 620,000 homes passed have access to video — Rutledge said that so far, the impact has been minimal.

In the two Cablevision markets where Verizon has had video service for a full year — Massapequa Park and Nyack, N.Y., representing about 16,000 homes passed — Rutledge estimated the cable company's video penetration has dipped by about 5.5 percentage points.

In those same markets, though, Cablevision's high-speed Internet penetration rose by about 2 percentage points and its voice service rose by 10 percentage points, Rutledge said.