Cablevision Profit Rises 13% on Demand for Video Recorders, High-Speed Web
Cablevision Systems Corp., the New York-area cable-television provider, reported third-quarter profit increased 13 percent as more customers elected premium services such as digital video recorders.
Net income rose to $112.1 million, or 37 cents a share, Bethpage, New York-based Cablevision said today in a statement. Sales gained 5.6 percent to $1.81 billion, beating the average estimate of $1.79 billion by analysts in a Bloomberg survey.
Through promotions and system upgrades, Chief Executive Officer Jim Dolan has signed up customers willing to pay more for advanced products, such as high-speed Internet and digital video recorders. Sales also rose at the company’s Rainbow unit, which consists of cable channels AMC, Sundance and IFC.
“Cablevision’s third quarter was good and in line with forecasts,” said James Ratcliffe, an analyst at Barclays Capital in New York, with an “overweight” rating on the stock. Earnings excluding interest, taxes and some other items were “somewhat better than expected on strong Rainbow performance,” he said.
Rainbow’s revenue climbed 12 percent to $291.4 million, bolstered by advertising sales.
The company bought back 5 million shares in the quarter for a total of $130 million, Gregg Seibert, an executive vice president, said on a conference call. Year-to-date Cablevision has bought 6.1 million shares for $157 million, he said.
Cablevision rose 72 cents, or 2.6 percent, to $28.36 at 4 p.m. in New York Stock Exchange composite trading. The stock has gained 33 percent this year.
The company added 9,600 high-speed Web users in the quarter and boosted its average monthly revenue per basic-video customer, or ARPU, by 5.7 percent from a year earlier to $149.04. The average for larger peer Comcast Corp. is $129.75.
“The results are similar to Comcast’s with strong business services and advertising revenues driving ARPU and margin growth,” said Chris Marangi, an analyst at Gabelli & Co. in Rye, New York. He recommends buying the stock.
Cablevision is touting the premium services to wring more out of existing customers as competition for new users intensifies. The company’s total number of customers fell by 9,800, compared with Marangi’s estimate for a gain of 10,000. In the second quarter, Cablevision added 75,900 customers.
New York-based Verizon Communications Inc., which competes against Cablevision for TV, phone and Internet subscribers, gained 204,000 customers in the third quarter for its high- definition FiOS TV service.
Fox Dispute ‘Rational’
The third quarter is typically weak for Cablevision because of seasonal disconnects as people leave summer vacation spots such as the Hamptons on Long Island, Marangi said.
The year-earlier net income was $98.9 million, or 33 cents a share. Last year, the company had a favorable adjustment of $25.7 million related to legal matters at the cable unit.
Last week, Cablevision settled a dispute with News Corp.’s Fox that resulted in the longest-lasting blackout of a major broadcast network for a million or more people in the last decade. The agreement restored access to the World Series and NFL Games, as well as other programming, for Cablevision’s 3 million customers in the New York area.
“It’s an unpleasant way of doing business having a major conflict like that, but we are trying to save our customers costs,” Chief Operating Officer Tom Rutledge said on a conference call. “Our behavior was not uneconomic. We think we did the rational thing.”
Whatever subscribers the company lost because of the fee dispute will be reflected in the fourth quarter. Rutledge declined to give a subscriber forecast for that quarter. He said the action was “rational,” meaning whatever customers were lost because of the two-week blackout were worth the reduction in the price that Cablevision achieved.
(Cablevision held a conference call at 10 a.m. New York time. For a replay, go to http://www.cablevision.com.)
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