Cablevision Stands Behind Voom

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Cablevision Systems Corp. reported strong operating results in the third quarter, but the MSO continued to defend its fledgling direct-broadcast satellite business in light of continued subscriber erosion.

Cablevision reported third-quarter overall revenue growth of 20% and adjusted operating income up 13%, fueled mainly by strong growth at its cable operations.

Cable revenue rose 14% and adjusted operating cash flow was up 16%. Digital-subscriber additions, at 171,400 in the period, were well ahead of analysts’ estimates of 104,000. High-speed-data additions also outpaced analysts’ estimates -- 80,000, as opposed to estimates of 40,000.

Cablevision also continued its strong growth in its voice-over-Internet-protocol telephone product, adding 74,000 customers in the period to finish with 189,200 voice subscribers.

Basic subscribers increased by 850 compared with estimates of a loss of as many as 4,500 customers.

On a conference call with analysts, chief operating officer Tom Rutledge said high-speed-data growth is not showing signs of slowing down -- Cablevision is adding roughly 1,000 new data customers per day, even in markets with high penetration.

Although overall data penetration is about 30%, Rutledge said that in Long Island, N.Y. -- Cablevision’s oldest data market -- penetration rates are expected to pass 50% in the current quarter.

Growth was equally strong at its Rainbow Media Holdings Inc. programming networks. Revenue at AMC, WE: Women’s Entertainment and The Independent Film Channel was up 22% in the period and adjusted operating cash flow increased 26%. At its regional sports networks, revenue rose 12% and AOCF increased 7%.

But the picture was not as bright at its Rainbow DBS unit, which lost 2,000 customers between August and September, ending the period with 26,000.

Cablevision said it was re-evaluating its marketing strategy for the DBS service, Voom, and it would focus on developing a successful marketing strategy rather than driving subscriber growth for the service in the future.

But despite the continued losses, CEO James Dolan defended the company’s strategy to continue the Voom service while facing continued pressure from investors to sell the operation.

“There is a vision there, and this company was built on vision,” Dolan said on the conference call. “Not everyone is going to agree, but not everyone agreed when my father [Cablevision chairman and founder Charles Dolan] started HBO [Home Box Office] or Suburban Cable.”
Dolan said the planned spinoff of Rainbow Media Enterprises -- which would include the Voom service and Rainbow’s national programming networks -- would sufficiently address investor concerns.

He added that the RME spinoff “hopefully” will be completed in the fourth quarter.

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