Sandy Effect Lingers for Cablevision

MSO’S REVENUE FALLS 1%; DISH SEES BROADBAND OUTPACE VIDEO
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The cable earnings season wound down last week with Cablevision Systems reporting sluggish first-quarter results, further amplified by the lingering effects of Superstorm Sandy, but hinting that better days lie ahead.

Consolidated revenue dipped 1% to $1.5 billion in the quarter, and adjusted operating cash flow plunged 26.9% to $343.4 million as basic-video subscriber losses, storm costs and high programming costs pounded the bottom line. On the systems side, revenue dipped 0.4% to $1.4 billion, and AOCF dropped 21.3% to $413.6 million.

Cablevision shed about 5,000 basic- video customers while high-speed Internet and phone subscribers rose by 23,000 each.

On a conference call with analysts, Cablevision CEO James Dolan said the company warned analysts that Cablevision “expected to experience significant AOCF pressure in the first quarter, which is exactly what occurred.”

The bulk of the declines were due to the impact of Superstorm Sandy, which ripped through Cablevision’s territory in Long Island, N.Y., and New Jersey last October, resulting in about $8 million in repair costs in the period and unfavorable programming- cost comparisons. Programming costs rose 12.8% for the period, in part because of the impact of the NFL Network, which Cablevision added to its lineup last year. Cablevision vice chairman and chief financial officer Gregg Seibert said on the conference call that the outlook should improve in the second quarter, since there will be no impact from the storm, which in turn should result in a double-digit sequential AOCF increase.

In a research note, Morgan Stanley media analyst Ben Swinburne said Cablevision’s results were largely within expectations.

“However, we think it will be difficult to maintain share and drive pricing growth, and with end markets not growing and programming costs ramping in the industry, Cablevision’s leverage creates the greatest downside risk to shares in our coverage group,” Swinburne wrote. “1Q cable revenue declines highlight this challenge.”

DISHING OUT BROADBAND

At No. 2 satellite-TV service provider Dish Network, broadband customer additions exceeded net new video subscriber gains for the first time in its history. Dish added 36,000 net new video customers and 66,000 broadband customers through its wireless high-speed Internet partnerships with ViaSat and CenturyLink.

But that didn’t appear to help financials at the satellite giant. Revenue was down 1% to $3.56 billion, and adjusted cash flow dipped 12% to $691 million in the period.

On a conference call with analysts, Dish chairman and CEO Charlie Ergen offered an update on its ongoing attempt to gain control of wireless giant Sprint Nextel. Dish made a $25.5 billion unsolicited offer for Sprint in April. Sprint’s board of directors is currently evaluating the proposal.

Ergen said he is confident that Dish’s proposal will prevail, but added that if it fails, Dish could sell its spectrum, find another partner or sell the company. Most analysts believe the first two options are the most likely alternatives.

Ergen said the Sprint deal would be transformative for both companies, adding that if given the choice, he would accept it ahead of a merger with No 1 satellite-TV provider DirecTV.

Dish tried to merge with DirecTV in 2001, but that deal was squashed by regulators. “It [Dish-Sprint] would become a unique company; it’s something that nobody else can do both inside and outside the home,” Ergen said.

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