Cablevision's financial future is getting cloudy. The big factors--a private buyout bid and growing competition from Verizon.
Although it reported higher net second-quarter
profits--some 5% higher to $317.4 million--the results were partly due to $190 million from the discontinued operations of FSN Chicago, FSN Bay Area and the ill-fated Rainbow DBS satellite broadcast
operation.
And though revenues grew 11% to $1.57, the company cut its total revenue forecast from its earlier projection of a mid-teens percentage increase.
Basic cable subscribers' growth is
flat, compared with the first quarter, while rising 1.2% from the prior year. Better news: the company says the average subscriber monthly spending climbed for the 17th consecutive quarter to $121, up
$4 from the first quarter.
A year ago, Cablevision made some major digital improvements in its New York City system--and got some initial good results. But it didn't last long--which is why, in
part, some financial results are down. Digital video subscribers only inched up 1.6% for the company by 39,000.
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"New York City got a significant lift [in video subscribers] as a result of that,
and we have not seen that lift continuing in the second quarter," says Tom Rutledge, Cablevision's COO, during a conference call with analysts. "So it appears to be more of a one-time lift rather than
a permanent one."
Analysts say the concern over the slow growth of digital video subs is a direct result of Verizon Communications' FiOS growing business in Cablevision's mostly New York area
systems. FiOS is now in 17% of Cablevision's operating territory.
"Verizon is spending between $80 million and $100 million a year [in marketing]," says Rutledge. "We have upped our marketing
spending, so our position doesn't get drowned out by that marketing."
Cablevision's cable networks' revenues--a smaller part of its overall revenue picture, which includes AMC, Independent Film
Channel, WE: Women's Entertainment and various regional sports networks--climbed 12% in ad revenues to $222.3 million, due to higher sellout rates. The networks witnessed a 9% increased in affiliate
fees. (AMC claimed 18 Emmy nominations--more that any other basic cable network.)
Another concern for the investing community--the details of the Dolan family's bid to take the company private.
The founding Dolan family offered about $36.26 a share, or $10.5 billion. Previously, the company's board spurned two previous bids from Chairman Charles Dolan and his son, CEO James Dolan.
The
company says broadband subscribers rose by 14.6%, compared with the second quarter a year ago; and digital phone customers rose by 6.1% to 81,000.