Closing the Cash Flow Gap
Cablevision COO Tom Rutledge acknowledged that there's "not much fixing to do" at Bresnan, which already has about 90 percent of its plant upgraded to at least 750MHz, and operates systems with an average density of 72 homes per mile -- on a par with the national cable industry average.
The upside, he predicted, will come in the form of increased cash flow. Cablevision, he noted, generates about $450 per home per year in cash flow today. Bresnan, by comparison, has been able to squeeze about $250 in the largely rural systems it operates in Wyoming, Colorado, Utah, and Montana.
He thinks Cablevision can apply the new services playbook it's using in New York, New Jersey and Connecticut, including the introduction of more HD services, in the Bresnan systems to help close that $200 gap.
Cablevision's model for the Bresnan buy doesn't call for the MSO to completely cover that gap, but "we think we can move the needle toward the $450 over time," Rutledge said.
And Cablevision hopes to extract some added value outside of the residential service potential. "There is a considerable small business opportunity in this [Bresnan] marketplace, just like there is at Cablevision, in proportional terms," Rutledge said, all but putting Bresnan's main wireline rival, Qwest Communications International Inc. (NYSE: Q), on notice that it should expect to see even more business services competition once Cablevision seals the deal.
Cablevision execs were coy about whether they might end up bidding for other smaller MSOs and systems that are expected to come on the market, noting only that the Bresnan deal offered "some unique aspects," and that today's announcement doesn't necessarily signal that Cablevision is now on a buying binge for small cable systems and other tier 2 MSOs.
— Jeff Baumgartner, Site Editor, Light Reading Cable