Strong 1Q Sub Growth for Cablevision

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Cablevision Systems Corp. reported its fourth consecutive quarter of basic-subscriber additions, driven by continued growth in its voice and digital products.

The MSO added 22,000 basic customers in the first quarter. Digital subscribers increased by 140,000 during the period, while high-speed-data customers rose 88,000 and voice customers increased by 92,000.

Digital penetration is now at 54.4% of basic-video customers and high-speed-data penetration is 32.3%, both tops in the industry.

Cablevision said it ended the quarter with 364,000 voice customers, but that number has since increased to about 400,000.

Overall revenue for the period was up 6% to $1.2 billion and adjusted operating cash flow grew 30% to $354 million. Revenue at its Rainbow Media Holdings LLC programming networks was up 4%, with AOCF increasing 6%. The cable operations fared much better, with revenue increasing 15% and AOCF up 19%.

While voice growth was strong, it could get even better in the coming quarters. On a conference call with analysts, president and chief operating officer Tom Rutledge said the MSO has recently made number portability -- the ability for customers to keep their old phone numbers -- available, which should further drive subscriptions.

“Almost all of the growth for VoIP [voice over Internet protocol] up until now has been as a result of marketing voice as part of a bundled package to new subscribers,” Rutledge said on the call. “We anticipate that we’ll have greater sales going forward than we’ve had to date.”

Rutledge also downplayed Verizon Communications’ announcement Thursday that it has expanded its rollout of its FiOS high-speed-data service to 10 additional cities in Long Island, N.Y., a Cablevision stronghold.

Rutledge said that in Syosset, where FiOS is already available, Cablevision has 78% video penetration and 56% high-speed-data penetration in the city of about 9,200. Verizon, on the other hand, has just 48 FiOS connections in Syosset, and 20 of those customers also subscribe to Cablevision’s Optimum Online high-speed-data service.

“The impact they’ve had in their marketing where they’ve activated is almost completely insignificant,” Rutledge said. “It makes you wonder why that kind of capital is being spent.”

Earlier on the call, Cablevision CEO James Dolan admitted that the Bethpage, N.Y.-based MSO was one of the bidders for Adelphia Communications Corp. And although Cablevision lost out to a joint bid from Time Warner Inc. and Comcast Corp., Dolan said the company would continue to look at acquisition opportunities.

“We saw an opportunity to take what we consider is a winning formula in how we run our cable systems and quickly translate that into results for the Adelphia systems,” Dolan said. “We saw a unique opportunity to do that. Unfortunately, we did not win the bid. We’ll continue to look at other opportunities, but to be honest, I think they are fairly scarce.”

Speculation had been that Cablevision could possibly sell some or all of its Rainbow programming networks to help finance the Adelphia bid. While Dolan said Rainbow is performing well and has significant growth opportunities, he hinted that something could happen down the road.

“I am still of the opinion that we need to make some strategic move with our networks,” he added. “What that is at this time, it would only be speculation, so I won't go into it.”

Cablevision shares were down 26 cents each to $26.74 per share in late-afternoon trading Thursday.

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