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Cablevision Calls Bargain-Seekers’ Bluffs

Two years ago, facing increased competition from Verizon Communications’ FiOS and uncertainty after the loss of chief operating officer Tom Rutledge, Cablevision Systems vowed to revamp operations by eliminating heavy discounting and focusing on higher-margin products.

The Bethpage, N.Y.-based cable operator last week began to show some signs that its strategy is taking hold, losing fewer subscribers than analysts expected in the fourth quarter, in part because of a decision back in the summer to start calling customers’ bluffs.

Cablevision lost about 18,000 basic-video subscribers in the fourth quarter, better than the 29,000 most analysts expected. High-speed data additions of 6,000 in the period also beat consensus estimates that the operator would lose about 3,200 Internet customers.

On a conference call with analysts, Optimum Services president Kristin Dolan said one of the reasons for the subscriber performance was the company’s hard-line stance on promotional pricing, particularly the practice of some customers to call their cable operator for an extension or some other perk as their existing promotion neared the expiration date. According to Dolan, Cablevision has had considerable success.

“We started in August with getting really strict about not extending the perpetual promotions,” she said. “A significant majority of those customers are still with us five and six months after they call for an extension.”

The lighter losses helped drive better financial results — revenue was up about 2.3% and adjusted operating cash flow rose 7.5% in the period.

Average monthly revenue per subscriber rose by $6.43 (4.6%) to $147.34 and average monthly revenue per video customer was $166.66, an increase of 8.8% over the same period in the prior year.

While Cablevision continues to be part of the consolidation guessing game that has intensified in the wake of Comcast’s pending acquisition of Time Warner Cable, the company declined any comment on M&A speculation.

But CEO James Dolan did say he believes that Cablevision’s Wi-Fi superiority could be a big driver of future growth. The company currently has about 100,000 Wi-Fi access points in its territory and with the rollout of in-home Wi-Fi smart routers, that number should grow to about 1 million access points by year-end.

“We think connectivity is really the most important product to our customers versus what historically has been the video product,” James Dolan said. “As we see that continue to evolve, there will be growth opportunity inside of that. The company’s Wi-Fi strategy is significant and sets us apart from the competition.”

Cablevision also managed to boost ad sales in the period — up 2.6% to $44 million — with non-political ad sales up a strong 20%. On the call, Local Sales president Tad Smith said the ad growth was due in part to Cablevision’s dedication to set-top box data.

Cablevision has been one of the pioneers of interactive advertising and analyzing internal set-top box info.

“Set-top box data is the first thing we talk about with advertisers and agencies,” Smith said.