Cable Operators

New Services Drive Cablevision 3Q Gains

11/14/2004 7:00 PM Eastern

Cablevision Systems Corp. reported strong operating results in the third quarter, managing a small basic-subscriber gain while exceeding estimates in new services growth.

The MSO reported third-quarter overall revenue growth of 20% and a 13% increase in adjusted operating income, fueled mainly by strong growth at its cable operations. Cable revenue rose 14% and adjusted operating cash flow was up 16%.

The addition of 171,400 digital subscribers during the period were well ahead of analysts’ estimates of 104,000 additions. High-speed data additions also outpaced analysts’ estimates — 80,000 as opposed to forecasts of 40,000 more customers.

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

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

On a conference call with analysts, Cablevision chief operating officer Tom Rutledge said that 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 — Cablevision’s oldest data market — penetration rates are expected to pass 50% in the current quarter.

The growth in telephony — currently only available with the high-speed data service — was spurred by a pricing promotion that enables new customers to receive the triple play of digital, voice and data service for $90 per month for a limited time. But more telling is that the promotion didn’t drive down average revenue per subscriber, which was about $110 per month for the bundle, indicating that new customers opted for higher-tier digital packages.

Cablevision also revised its year-end revenue and adjusted operating cash flow guidance upward, stating that both revenue and cash flow growth — previously expected to be between 13% and 15% for the quarter and between 14% and 16% for the year — would be at the high-end of each range.

While the numbers were stellar at the cable systems, growth was equally strong at its Rainbow Media programming networks — revenue at AMC, WE: Women’s Entertainment and 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%.

Cablevision also launched a classified advertising channel on its digital cable high-speed data services in October — initially focusing on pre-owned auto sales — which it hopes will expand revenue.

September