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November 08, 2006

Cablevision Reports Inline: Implications Limited

I see little impact from Q06 results from Cablevision (CVC), either on CVC or on the broader cable industry. The company's results were very close to consensus estimates with revenues rising 13% and EBITDA rising 16%. Subscriber metrics look a little below expectations for high speed data and digital TV but analysts didn't seem too concerned and management aggressively promoted a seasonality argument that seems plausible to me.

There was no commentary in the press release or on the conference call about the Dolan family's bid to take CVC private. Industry observers expect a deal to get done which makes the quarterly results not very important for the outlook for CVC shares. Only a large deceleration in growth would impact the privatization attempt and clearly this quarter showed no signs that might occur.

The broader implications for cable were similarly minor.....

CVC's cable results were very strong with revenues rising 19% and EBITDA rising 18%. Given that CVC is furthest along among major cable companies in rolling out the triple play of TV, broadband, and voice, analysts expect other cable companies to enjoy similar growth rates over the next year or two. Following some signs of deceleration in the cable division at Time Warner (TWX) when it reported last week, investors will be relieved to see solid results from CVC.

As mentioned, high speed data and digital subscribers grew a little less than expected but basic subs were up for the 10th straight quarter and telephony subs matched expectations. Management said the slight shortfall in digital TV and broadband subs was due to summer home disconnections on Long Island and the Jersey shore.

The reason it is important to monitor CVC's reutls for broader industry trends is that its penetration of its customer base is very high. 76% of all CVC cable TV subscribers now take digital TV. 63% take high speed internet and 5% take phone. These penetration levels are near where analysts think that growth could stall. Conseqeuntly, CVC's role as the first to market with these products makes it a good guidepost for the rest of the cable industry. 3Q results suggest no problems in the near future.

Posted by Steve Birenberg at November 8, 2006 10:47 AM in CVC