Cablevision Systems shares edged up last week after the cable operator reported strong fourth-quarter results, including a 10.8% increase in net revenues and, more important, a slight increase in basic-video subscribers, despite intense competitive pressure from telco Verizon Communications and its FiOS TV service.
Cablevision's fourth-quarter consolidated net revenue—which includes its telecommunications services, Rainbow Media Holdings and Madison Square Garden businesses—was $1.84 billion compared with $1.66 billion for the same period in 2006, while adjusted operating cash flow increased 20.4% to $610.2 million and consolidated operating income grew 63% to $330.3 million. For the full 2007 fiscal year, consolidated net revenue increased 11.3% to $6.5 billion.
Cablevision's telecommunications business added 798,000 revenue-generating units during 2007 and 208,000 RGUs for the fourth quarter, and posted an average monthly revenue per basic-video customer of $125.10 for the fourth quarter.
Most impressive was that Cablevision actually added 1,000 basic-video subscribers during the quarter in the face of aggressive marketing pushes by both Verizon FiOS and satellite competitor DirecTV.
"That Cablevision reported positive basic subscribers is a remarkable feat given the extensive overlap with Verizon's FiOS," Sanford C. Bernstein analyst Craig Moffett wrote in a research note to investors. "While a positive subscriber result had been widely rumored during the quarter, it nevertheless represents a clear positive surprise versus expectations, which have been persistently bearish in terms of long-term subscriber retention."
Cablevision's Rainbow programming unit, also posted healthy results, with Q4 2007 revenues increasing 14.2% from the same period in 2006 to $243.9 million, adjusted operating cash flow rising to 9% to $49.4 million and operating income increasing 86.5% to $25.4 million. That bump, Moffett said, could largely be attributed to improved programming at Rainbow flagship AMC.
"Just one year ago, we worried that Rainbow's core AMC asset was strategically disadvantaged and risked becoming nothing more than a tired collection of old movies available elsewhere on-demand," Moffett wrote. "In just 12 months, AMC has successfully reinvented itself as one of the hottest networks in all of cable with an award-winning lineup of programming and a portfolio of new long-term affiliate agreements."