Rainbow Pulls Cablevision Down in 2Q

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Cablevision Systems Corp. reported strong second-quarter results in its cable operations -- basic customers rose by nearly 21,000 and voice customers increased by 114,000 -- but weaker-than-expected results at its Rainbow Media Holdings LLC programming networks drove down overall results for the period.

Revenue for the company was up 6% to $1.2 billion in the quarter, but adjusted operating cash flow decreased 14%, mainly due to weakness at Rainbow.

In the telecommunications segment, which includes Cablevision’s cable operations, revenue increased 16% to $855.6 million and AOCF was up 13% to $337.2 million in the period.

Cablevision continued its strong basic-subscriber growth -- its 20,757 new basic-video customers was its fifth consecutive quarter of basic-subscriber growth. Digital-video customers also rose by 118,000 and high-speed-Internet customers grew by 79,285.

The poor performance at Rainbow -- which includes cable networks AMC, The Independent Film Channel and WE: Women’s Entertainment -- was attributed to higher programming costs for new series and movie acquisitions and marketing expenses. Revenue at the networks was down 17% to $202.4 million and AOCF declined 37% to $29.4 million.

In a conference call with analysts, Rainbow president Josh Sapan said those expenses will be substantially lower in the second half of the year. He reiterated Rainbow’s full-year guidance of mid- to high-single-digit revenue and AOCF growth.

Cablevision would not comment on the proposal by the Dolan family, which controls the lion’s share of the MSO’s voting stock, to take the company private in a $7.9 billion deal. CEO James Dolan said an independent committee of its board of directors is currently evaluating the Dolan-family proposal. He would give no time frame as to when that evaluation will be completed.

Cablevision shares were down 38 cents each to $31.05 per share in Tuesday-morning trading.

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