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Cable Operators

Strong Cable Results for Cablevision

8/12/2005 8:00 PM Eastern

Cablevision Systems Corp. reported strong second-quarter results by its cable operations — basic customers rose by nearly 21,000 and voice subscribers increased by 114,000 since March 31 — but weakness at its Rainbow Media Holdings programming networks drove down overall results.

Overall revenue was up 6% to $1.2 billion versus the same quarter a year ago, but adjusted operating cash flow decreased 14%, mainly due to weakness at Rainbow. In the telecommunications segment, which includes Cablevision’s cable operations, revenue rose 16% to $855.6 million and AOCF rose 13% to $337.2 million.

Cablevision continued strong basic-subscriber growth: its 20,757 new basic-video customers was its fifth consecutive quarter of basic subscriber adds.

Digital-video customers also rose 118,000 and high-speed Internet customers grew by 79,285.

Weaker-than-expected performance at Rainbow Media — which includes cable networks AMC, Independent Film Channel and WE: Women’s Entertainment — was blamed on higher programming costs for new series and movie acquisitions and marketing expenses. Revenue at the networks dropped 17% to $202.4 million and AOCF declined 37% to $29.4 million.

In a conference call, Rainbow Media CEO 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.

Sapan said AMC’s legal dispute with Time Warner Cable — the MSO won a judgment that would allow it to drop AMC because its format changed — also had an effect.

He said AMC and Time Warner Cable are in talks to settle the legal matter.

Cablevision would not comment on the proposal by the controlling Dolan family to take the company private for $7.9 billion. An independent committee of directors is evaluating the proposal.

Cablevision CEO James Dolan gave no time frame as to when that evaluation will wrap up.

The weakness at Rainbow could pose a problem for the Dolans’s plans to take the company private. Rainbow is an integral part of the offer — $33.50 per share, $21 in cash and the rest in a spin-off of Rainbow valued at $12.50 per share.

September