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Cable Operators

Voom Launches Cablevision Into the Red

3/02/2004 3:18 AM Eastern

Cablevision Systems Corp. posted a $46.2 million consolidated operating loss in the fourth quarter of 2003 compared with operating income of $70.6 million a year earlier due to launch costs associated with Voom, its HDTV direct-broadcast satellite service, along with higher depreciation and amortization costs and higher stock-plan expenses.

Overall company revenue rose 12% in the quarter to $1.2 billion and adjusted operating cash flow declined 19% to $249.9 million due to Voom launch costs and lower AOCF at Rainbow Media Holdings Inc. and Madison Square Garden.

Full-year net revenue increased 10% to $4.2 billion and AOCF rose 5% to $1.1 billion versus 2002.

The company produced strong growth in new services, including 28,700 voice-over-Internet-protocol subscribers. Cablevision averaged 1,800 additions per week in the quarter. "It looks like a very attractive future product for us," said Tom Rutledge, president of the cable and communications division.

Cablevision added 150,200 digital subscribers in the quarter to reach 900,000, or 31% penetration by year’s end. Some 72,200 high-speed-data subscribers were added in the quarter to total 1 million across the MSO for a 24% penetration rate.

HDTV subscribers, which reached 38,000 by year’s end, grew another 23,000 by the end of February, Rutledge said, giving it a total of 61,000.

The only chink was basic-subscriber losses. Cablevision lost 11,400 in the quarter and 19,600 for the full year. Rutledge said the MSO’s New York City rebuild was completed in the fourth quarter, enabling it to better compete with DBS in the Bronx and Brooklyn, which accounted for 90% of the MSO’s basic-subscriber losses.

Additional growth in advertising and video-on-demand, plus the digital and high-speed-data additions, helped total revenue per basic-video subscriber, per month jump 17% to $76.74 versus $65.56 a year ago.

Cablevision projected that it will reach free cash flow by the fourth quarter of 2004. The company projected basic-subscriber additions of 0.5% in 2004 and revenue-generating-unit growth between 850,000-900,000.

The company expects revenue growth between 12%-14%, AOCF growth between 13%-15% and capital expenditures of $600 million.

September