Q4 A Mixed Bag For Cablevision

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Cablevision Systems reported a mixed fourth quarter Thursday, with revenue at its cable business up 7% in the period, but adjusted operating cash flow growth at 4%, impacted primarily by its decision last year to shutter its Voom HDTV programming service.
Revenue at the cable operations was $1.3 billion and AOCF was $498.1 million. For the year, cable revenue grew 9.1% to $5 billion and AOCF increased 10.7% to $2 billion. For the full year, free cash flow -- cash flow after interest payments and capital expenditures are made -- more than tripled to $507 million from $158 million in 2007.
The Bethpage, N.Y.-based MSO said it lost about 3,800 basic subscribers in the quarter, well outpacing analyst consensus estimates of 12,000 basic subtractions. But the company slightly missed some other key subscriber metrics -- digital customers were up 22,800; high-speed data subscribers increased by 28,200 (vs. consensus of 31,000 additions) and digital phone customers rose 53,400 (vs. consensus of 56,000 additions).
On a conference call with analysts, Cablevision chief operating officer Tom Rutledge blamed the lower AOCF growth on two factors: the shutdown of Voom and the sluggish economy.
Cablevision decided to shutter Voom in December.
"Voom was not in the plan for the fourth quarter," Rutledge said. "We decided to keep these costs in because we kept the service on. These costs were unplanned and exceeded the prior fourth quarter of 2007 when Voom costs were in at substantially lower rates."
In its earnings press release issued early Thursday morning, Cablevision said it took a $41 million impairment charge in the quarter as a result of the Voom shutdown.
Analysts were split on the quarterly performance, although all were impressed by the company's free cash flow growth.
In a research note early Thursday, Miller Tabak media analyst David Joyce wrote that while Cablevision missed his estimates slightly, he did not expect it to have a long-term material impact. Sanford Bernstein cable and satellite analyst Craig Moffett wrote in a research note that results were in line with expectations. But Moffett was most impressed by the company's free cash flow yield, which he estimated to be 14% on 2008 AOCF and 20% on estimated 2009 AOCF.
"Cablevision's just-reported results are a stark reminder that Cablevision is still decidedly a ‘growth' franchise, at least on trailing metrics," Moffett wrote. "Indeed, as the macro-economy has contracted around it, Cablevision's growth rates - for revenues, EBITDA, Free Cash Flow, and even good old fashioned earnings - look remarkable."
Cablevision continues to differentiate itself against telco and satellite competitors. Its high-speed Wi-Fi wireless data network build out is about one-third completed - the next market launched will be in New Jersey - and an announcement on a new DOCSIS 3.0 wideband product, primarily targeted at business customers, should be coming soon.
However, Rutledge said the wideband product is more of a long-term strategic product and is not expected to have a significant impact on second half results.
Cablevision shares were up 4.2% (56 cents each) in early trading Thursday to $13.92 per share.

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