Cablevision Systems’ Operating Income Jumps in Q3, Subs Fall by 16K

Cablevision Systems’ operating income jumped 59.1% in its third quarter while the cable operator reported a loss of basic-video subscribers of 16,000.

The company, the fifth-largest cable operator in the country, recorded a 9.7% rise in revenue to $1.512 billion in the third quarter led by its cable-television service, which rose 9.7% to $1.135 billion.

Revenue from the company’s programming arm, Rainbow Media Holdings, increased 16.7% to $221.8 million, while its commercial voice and data service rose 6.3% to $55.3 million and its Madison Square Garden unit increased 1.4% to $130.3 million.

On a consolidated basis, the company recorded operating income of $202.1 million versus $127 million in the same quarter a year ago. Adjusted operating cash flow rose 15.5% in the quarter to $494.3 million. Cablevision’s net loss in the quarter was $79.3 million versus a loss of $59.16 million a year earlier.

The company’s cable business saw operating income in the quarter rise 21.2% to $211.7 million and adjusted operating cash flow rose 8.5% to $431.2 million, led by a rise in revenue-generating units of 161,000, or 1.7%, to 9.417 million. While the company lost 16,000 basic-video subscribers in the quarter, bringing its total number of basic subscribers to 3.122 million, the average revenue per subscriber rose 8.8% from a year ago to $120.91 as customers took additional services.

The company added 35,000 digital-video customers in the quarter, bringing the total number of customers that take this offering to 2.585 million, while adding 52,000 high-speed-data customers, a 2.3% rise to 2.22 million. The sharpest increase in the cable segment’s product offerings came in Optimum Voice with the addition of 91,000, or a 6.5% rise, to 1.49 million customers.

Chief operating officer Tom Rutledge said the company has held its own against increased competition, particularly from telco Verizon Communications, which is rolling out its FiOS TV service aggressively in the company’s footprint.

Rutledge estimated that Verizon has passed 1.1 million homes in Cablevision’s footprint but added that Cablevision’s high penetration of triple-play customers (almost one-half of its customer base) is a guard against poaching by Verizon because those customers typically disconnect at lower rates.

The revenue increase at the Rainbow unit was led by a 22.4% increase in advertising revenue, as well as increases in viewing subscribers and affiliate fees. Adjusted operating cash flow at the unit was up 41.5% to $51.9 million while operating income rose to $25 million from $6.8 million in the same quarter a year ago.

The company said it expects net RGU additions of 800,000 in full-year 2007, down from its previous guidance of 825,000-900,000. Adjusted operating cash flow will also grow at a lower-than-expected rate, by 9%, compared with 10%. The company still expects total revenue growth in 2007 to be approximately 11%, capital expenditures to be in the low end of the $600 million-$650 million range and basic-video-subscriber growth rate to be flat.

The bid to take the company private by company chairman Charles Dolan and his son and CEO James Dolan was rejected by shareholders last month. The Dolans were looking to buy the company at a price of $36.26 per share -- a price that many investors thought undervalued the company’s assets.