Cablevision Systems Corp. told analysts last week that it
will likely make an announcement regarding its planned sale of cable systems in Boston,
Cleveland and Kalamazoo, Mich., by the end of the month.
Cablevision -- which announced plans to either sell or form
a strategic alliance with another company concerning the three systems -- had originally
expected to close the deal by mid-November.
According to several sources, the front-runners for the
Boston system are MediaOne Group Inc. -- which already has about 1 million customers in
that area -- and Time Warner Cable.
In Cleveland, the leading candidates are Time Warner and
Cox Communications Inc.
Comcast Corp. and Charter Communications are seen as the
leaders for Kalamazoo.
CIBC Oppenheimer Corp. cable and telecommunications analyst
Aryeh Bourkoff said that while Cablevision would likely be open to a system swap, he
believes the company is more interested in getting cash for the systems.
"Their interest is in deleveraging," Bourkoff
said. "If they do find a way to swap systems and bolster the New York market, they'll
do that. But my sense is that they are looking to divest."
With a combined 714,000 subscribers, the three markets
could bring in between $3.2 billion and $3.6 billion, given current cable valuations of
$4,500 to $5,000 per subscriber.
When Cablevision set the mid-November deadline, many
analysts believed it meant that the company already had buyers picked out. Apparently, the
systems have attracted so much interest that Cablevision needs more time to sort through
The company also said it is awaiting word from the Internal
Revenue Service regarding the tax-free status of a proposed spinoff of its Rainbow Media
Holdings Inc. programming subsidiary.
Bourkoff said the company indicated that a spinoff of the
Rainbow assets is "definitely one of the logical options."
On the financial front, Cablevision reported a 12 percent
increase in adjusted operating cash flow in the third quarter to $239.9 million on revenue
of $902.3 million, up 9 percent. Net losses at the company increased to $178.1 million, or
$1.17 per share, compared with last year's loss of $113.6 million (75 cents).
Cablevision attributed the revenue growth during the period
to strong subscriber growth of about 2.5 percent, the addition of 34,000 new subscribers
to its "Optimum TV" advanced-analog tier, a 15 percent rise in advertising
revenue and a 27 percent increase in pay-per view revenue.
Recurring revenue per subscriber rose $1.93 to $44.56 in
the period compared with last year.
"Overall, it was a good quarter," Bourkoff said.
"I was pleased with the subscriber growth. If there is one issue that is a little
disconcerting, it is the lack of aggressiveness on the digital side."
Lightpath, Cablevision's commercial telephone service on
Long Island, N.Y., had net revenue of $17.6 million in the quarter, up 32 percent.
Adjusted operating cash flow at the telephony unit was $10.4 million in the period, a 50
percent increase. Access lines were up 11 percent to 4,650, bringing its total number of
access lines to more than 45,500.
For the nine-month period, Lightpath's net revenue was
$50.5 million and its adjusted operating cash flow was $29.7 million, representing
increases of 32 percent and 47 percent, respectively.
High-speed cable-modem service -- available on Long Island
and in Fairfield County and portions of New Haven County, Conn. -- also saw increases. The
company ended the quarter with nearly 31,500 modem customers, representing an average
penetration of 4 percent of homes marketed. For the quarter, the company added more than
9,200 customers and averaged more than 700 installations per week.
Residential telephone service -- marketed in Long Island
and in Fairfield County as "Optimum Telephone" -- had 6,600 customers at the end
of the quarter, more than 8 percent of homes marketed.
On the programming side, Rainbow also reported improved
results, with revenue up 26 percent and adjusted operating cash flow up 53 percent at the
American Movie Classics and Bravo units. AMC's affiliated basic subscribers totaled 71.7
million, a 7 percent increase from a year ago, and Bravo's totaled nearly 45 million, up
31 percent from last year.
For the nine-month period, AMC's and Bravo's combined net
revenue was $187.5 million and adjusted operating cash flow was $77.8 million, up 23
percent and 40 percent, respectively, from the prior year period.
Net revenue for Rainbow Developing -- which includes The
Independent Film Channel, Romance Classics, Bravo Latin America, the News 12 networks, the
MetroChannels and Rainbow Advertising Sales Corp. -- was $41.4 million, a 35 percent
increase. The unit also pared down its adjusted operating-cash-flow deficit in the quarter
to $12.2 million, from $18.8 million in the same period last year.
Cablevision also said it will list its class-A common stock
on the New York Stock Exchange effective Dec. 7, under the same ticker symbol,
"CVC." The company's shares will continue to trade on the American Stock
Exchange until that time.