The first-quarter earnings season for MSOs came to a close last week as Cablevision Systems Corp. and Mediacom Communications Corp. both reported strong growth in digital and high-speed data subscribers.
Mediacom reported strong revenue growth (10.6%), and operating cash flow rose 16%, to $97.2 million, mainly on gains in high-speed data subscribers.
Mediacom added 5,000 digital customers (it now has 374,000) and 24,000 high-speed data subscribers (to 214,000) in the period.
Mediacom chairman Rocco Commisso on a conference call with analysts deflected concerns about how price cuts for digital-subscriber-line service from telephone companies would affect Mediacom's data business.
Free cash coming
"DSL competition has become a hot topic lately, but we haven't seen any discernible impact on our business," Commisso said.
"It's pretty clear the low densities in many of the small cities and towns we serve post significant costs and technological hurdles for DSL," he said. "We can offer high-speed data as far as 100 miles from our master head-end, while DSL sweats if their customer is more than 15,000 feet from their central office."
Commisso said that capital expenditures were continuing to fall, adding that Mediacom should report free cash flow (cash flow after capital expenditures and interest payments are made) in the second half of the year.
Basic-subscriber growth was down – by about 8,000 subscribers in the quarter. That was mostly due to the sale of a 3,000-subscriber system in January and the relocation of about 2,000 customers that were military personnel in Florida, Georgia and Kentucky.
Mediacom did lose about 3,000 net subscribers to direct-broadcast satellite rivals.
Commisso said that in several markets, DBS has launched local-into-local broadcast service in conjunction with a Mediacom rate increase.
Commisso said that in light of seasonal trends, he expects to lose subscribers between the first and second quarters as well.
But that should reverse itself by the second half of the year, he said.
Cablevision results
Cablevision also reported basic-subscriber losses for the period – about 11,600 customers – but said that loss had been reversed by May.
In a conference call with analysts, cable and communications division president Tom Rutledge said the Bethpage, N.Y.-based MSO added 4,700 customers in March, 6,500 in April and 6,300 so far in May.
To date, Cablevision has added 1,200 basic customers, he said.
Cablevision CEO James Dolan said that in light of the recent subscriber increases, the MSO was on track to meet its guidance of 0.5% subscriber growth for the year.
Company-wide revenue increased 7.8% in the quarter to $982.2 million and cash flow was up 36% to $299.2 million.
But Cablevision reduced year-end cash-flow growth to 16% to 18% (from a possible 20%), primarily because of increased programming costs associated with its agreement to carry the YES network.
That revelation hurt Cablevision stock – it was down 7%, or $1.56 per share to $20.24 each in 4 p.m. trading May 13. The stock regained some of that ground May 14, to $20.50 per share (up 26 cents) in 4 p.m. trading.
At the cable operations, revenue rose 7% to $633.8 million and cash flow increased 12% to $246.7 million. Digital and high-speed data subscriber growth was strong in the quarter. Cablevision nearly doubled its iO: interactive Optimum digital customers to 401,400 in the period, up nearly 185,000 subscribers. The MSO added 82,700 high-speed data customers, bringing the total number to 852,800 subscribers.
Rainbow rises
Its Rainbow Media division – comprising AMC, Independent Film Channel, WE: Women's Entertainment and several regional sports networks – had substantial gains in the period: revenue was up 16% and cash flow was up nearly five-fold from $8 million in 2002 to $39 million, mainly due to advertising gains.
Regarding Cablevision's DBS venture, Dolan said permission was granted to delay the launch of its satellite until Aug. 31. Dolan said Cablevision has earmarked about $80 million for the venture this year, adding that the MSO continues to look at its strategic options.
"We will continue to consider all of our options," Dolan said on the conference call. "We will seek to maximize the value of the asset and will continue to take advantage of strategic opportunities."
