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Is Cablevision Turning Its Ship Around?

Alan Breznick
2/25/2016

Gearing up for its proposed acquisition by Altice, Cablevision Systems posted better customer metrics for the fourth quarter and all of 2015 but continues to struggle with video subscriber losses and shrinking profit margins.

Cablevision Systems Corp. (NYSE: CVC), the fifth-largest cable operator in the US with 3.1 million total residential customers, reported Thursday morning that it added 13,000 total customers in the fourth quarter. That enabled it to eke out a slight increase of 2,400 customers for the entire year, a marked improvement over the 70,000 subs it lost in 2014 and making 2015 the first year of customer gains since 2008.

As usual, broadband led the way as Cablevision netted 25,000 high-speed data subscribers for the quarter and 49,000 for the full year. The MSO closed 2015 with slightly over 2.8 million broadband subs, giving it an envious penetration rate of more than 55%.

Further, Cablevision continued the ambitious expansion of its Optimum WiFi service. The MSO reported ending the year with more than 1.4 million WiFi access points deployed throughout the New York area. It also reported that more than 1 million of its broadband customers now use the WiFi service monthly, averaging more than 9GB of data usage per month.

However, Cablevision continued to shed video subscribers on both a quarterly and annual basis, albeit at a reduced rate. The big New York cable operator lost 10,000 video subs in the fall quarter and 87,000 video subs for the full year even as it aggressively trotted out "skinny bundle" packages to stave off cord-cutting, reducing its video customer base to slightly under 2.6 million. While these quarterly and annual losses are down from the previous respective reporting periods, Cablevision's video sub metrics are still lagging behind those of such other major publicly traded US MSOs as Comcast Corp. (Nasdaq: CMCSA, CMCSK), Time Warner Cable Inc. (NYSE: TWC) and Charter Communications Inc. . (See Cablevision Chief Sees OTT Shift and Comcast Earnings: A Study in Contradictions.)


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Despite the overall customer gains, Cablevision's total revenues fell in the fourth quarter and its profit margins shrunk over the second half of the year. Neither result bodes well for the company's takeover by French telecom giant Altice , which is now seeking regulatory approval of its proposed $17.7 billion deal, despite stiff resistance from New York State and New York City officials concerned about potential job and investment cuts if Altice carries through on its planned "cost synergies." (See Altice Confirms $17.7B Bid for Cablevision.)

As Wall Street analyst Craig Moffett, a principal in MoffettNathanson LLC , warned again in a fresh note to investors this morning, Altice will face huge challenges in achieving the more than $900 million in cost cuts it envisions even if city and state officials drop their opposition. Moffett also warned that Cablevision's growth prospects are not proving to be as strong as Altice initially projected. As a result, he concluded, "Altice would need not $900 million in synergies, but $1.6 billion of them, to justify the price they paid." (See Analyst Sounds Warning on Altice/Cablevision Deal.)

In a prepared statement, Cablevision CEO James Dolan hailed the year as "a turning point for Cablevision in several ways." Dolan noted that the company added total customer relationships for the first time in seven years and closed out the year "with more high-speed data customers than ever before in our nation's most competitive telecommunications market." For the second quarter in a row, Cablevision did not hold an earnings call with analysts.

— Alan Breznick, Cable/Video Practice Leader, Light Reading

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KBode
KBode
2/29/2016 | 8:10:09 AM
Ship...
Really a very precarious situation at the moment that makes it impossible to tell.

The company's still bleeding broadband customers, has been in a holding pattern for years as it shopped for a suitor, and is about to be acquired by a company with an overseas reputation for cutting corners. That companies jumping into a saturated broadband market against an entrenched competitor with a superior product (FiOS). That's a tricky recipe.
thebulk
thebulk
2/29/2016 | 5:28:32 AM
Re: Captain Iceberg
I think this is the type of thing where we need to see the changes in perspective so it will take time to really have an idea if it works. 
mendyk
mendyk
2/25/2016 | 1:48:21 PM
Captain Iceberg
The biggest turning point for Cablevision is still to come: when Captain Jimmy cedes the tiller for good. Then the scow that is the New York Knicks will have his full attention. A dusty trophy case awaits.
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