Long Island-based cable operator Cablevision Systems issued its Q1 06 earnings report this morning and the accumulated, irrefutable evidence is in: cable is hot again. Even more so than its peers, Cablevision reported strong growth across the board and posted even better results than the solidly performing, New York-centric operator usually reports.
Financials first: Telecommunications (everything except Rainbow programming properties) rose 16.7% year-over-year and 4.6% sequentially to $993 million. Operating cash flow advanced 17.3% year-over-year and .7% sequentially to approximately $382 million.
Driving this growth was the stellar take-up rates in everything — basic, digital, high-speed and telephony subscribers. Cablevision posted its eighth consecutive quarter of basic subscriber growth, a true anamoly for the cable industry, and recorded its highest basic subscriber gains since the first quarter of 2000. Cablevision added almost 39,000 new core video customers, ending the quarter with 3.066 million basic customers, representing a pentration rate of 68.1%, the highest in the industry.
The number of digital customers grew by a net 167,740, a run-rate 17.7% higher than Q1 05 levels and up 38% sequentially. Cablevision ended the quarter with 2.172 million digital video subscribers, representing 69.4% of total basic subscribers, again, the highest in the industry.
Despite stiffening competition from Verizon, Cablevision’s growth in high-speed customers accelerated. During the quarter, the company added 112,289 net new high-speed customers, a gain that was 27.5% bigger than the net high-speed additions in the year-ago quarter and 19.6% bigger than Q4 05 levels. By the end of Q1 06, Cablevision served 1.8 million high-speed customers, representing an industry record of nearly 40% penetration of homes passed…and, you guessed it, the highest in the industry.
Cablevision’s digital voice (or VoIP) service continued its upward climb, with the operator adding approximately 134,000 net new customers, 46% more than the net new digital voice adds in Q1 05 and up 2.9% over Q4 05 levels. Cablevision ended the quarter with 865,308 total digital voice customers, almost 20% of the homes capable of buying the service.
| Cablevision Systems Operational Statistics (in mil., except%) | |||||
| Basic Subscribers and RGUs | 1Q05 | 2Q05 | 3Q05 | 4Q05 | 1Q06 |
| Homes passed | 4.453 | 4.464 | 4.474 | 4.484 | 4.501 |
| Basic subscribers | 2.985 | 3.006 | 3.011 | 3.027 | 3.066 |
| Pro Forma annual sub growth | 1.4% | 1.8% | 2.0% | 2.2% | 2.7% |
| Basic penetration | 67.0% | 67.3% | 67.3% | 67.5% | 68.1% |
| Monthly churn | 1.6% | 1.7% | 2.1% | 1.8% | 1.5% |
| Digital Video | 1Q05 | 2Q05 | 3Q05 | 4Q05 | 1Q06 |
| Digital subscribers | 1.623 | 1.741 | 1.843 | 1.963 | 2.127 |
| Quarterly net sub adds | 0.140 | 0.119 | 0.102 | 0.119 | 0.165 |
| Penetration of total basics | 54.4% | 57.9% | 61.2% | 64.8% | 69.4% |
| Monthly churn | 2.2% | 2.3% | 2.6% | 2.2% | 1.9% |
| High Speed Data | 1Q05 | 2Q05 | 3Q05 | 4Q05 | 1Q06 |
| Customers | 1.441 | 1.520 | 1.600 | 1.694 | 1.807 |
| Quarterly net adds | 0.088 | 0.079 | 0.081 | 0.094 | 0.112 |
| % change | -6% | -10% | 2% | 17% | 20% |
| Penetration of homes passed | 32.3% | 34.0% | 35.8% | 37.8% | 40.1% |
| Monthly churn | 1.9% | 2.0% | 2.4% | 2.0% | 1.7% |
| Digital Voice | 1Q05 | 2Q05 | 3Q05 | 4Q05 | 1Q06 |
| Customers | 0.364 | 0.478 | 0.601 | 0.731 | 0.865 |
| Quarterly net adds | 0.092 | 0.114 | 0.123 | 0.130 | 0.134 |
| Penetration of Optimum Voice | 8.2% | 10.7% | 13.4% | 16.3% | 19.2% |
| Circuit-Switched | 1Q05 | 2Q05 | 3Q05 | 4Q05 | 1Q06 |
| Homes marketed | 0.157 | 0.157 | 0.157 | 0.157 | 0.157 |
| Customers | 9,002 | 8,592 | 8,224 | 7,810 | 7,251 |
| Penetration | 5.7% | 5.5% | 5.2% | 5.0% | 4.6% |
| Residential Voice - Total | 1Q05 | 2Q05 | 3Q05 | 4Q05 | 1Q06 |
| Total Residential Voice Subs. | 0.373 | 0.487 | 0.609 | 0.739 | 0.873 |
| % of homes passed | 8.4% | 10.9% | 13.6% | 16.5% | 19.2% |
The picture is so bright that Cablevision upped some key parts of its financial guidance for the year. The company is now projecting basic video subscriber growth at 2.5% to 3.0% (instead of the earlier 2.0% to 2.5%) and net revenue generating unit additions of 1.3 million to 1.5 million (replacing the earlier projection of 1.0 million to 1.25 million).
During the earnings call, COO Tom Rutledge said that Cablevision is gearing up to launch its switched video service company-wide. That option, which increases bandwidth dramatically, will be applied to the creation of a 30-channel foreign language package priced at $4.95/month for digital customers or $14.95/month for non-digital customers.
Rutledge also said that Cablevision is getting ready to roll out a business high-speed Internet service that delivers maximum speeds at a price comparable to residential high-speed options. This move will no doubt spur Verizon to step up its competitive efforts with Cablevision.
Those efforts, Rutledge said, don’t seem to be having much of an impact on Cablevision’s customer penetration. In response to a question, he also said that Verizon has been putting out “false” information regarding the success of its FiOS video services in Massapequa, a small town in Cablevision’s service territory.
Verizon claims that it achieved 6.5% video penetration in Massapequa in the first three months following the launch of its fiber-based video services there. “We don’t believe that number and don’t understand how anyone can argue that they have that number,” Rutledge said. “It looks they’re marketing to concentrated areas so that they can get a press release and indicate that they’re being successful.”
Rutledge said that Cablevision lost 200 subscribers in the 8,500-home hamlet and managed to ultimately lure back 28 of those customers. “We think their number is false,” Rutledge said.
Cynthia Brumfield at 2:17 PM|Comments(0)
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