Cablevision Second-Quarter Underlying Profit Rises, Subs Drop

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Cablevision CEO James Dolan

UPDATED: The cable company, led by CEO James Dolan, lost 28,000 video subscribers, with broadband subscribers also falling for the first time.

Cablevision Systems on Tuesday reported improved underlying second-quarter financials as it continued to lose pay TV subscribers and also lost broadband users and telephony customers for the first time.

One Wall Street observer said the broadband decline was the first he remembers seeing at a major U.S. pay TV operator.

The cable operator controlled by the Dolan family posted quarterly earnings of $94.2 million, compared with $135.4 million in the year-ago period, which included a gain from a payment in the Voom litigation. Income from continuing operations, which excludes that year-ago payment, amounted to $91.0 million, up from $28.2 million. The figure exceeded Wall Street expectations.

Operating profit rose 29 percent to $255.9 million. Revenue of $1.63 billion was up 3.7 percent, also exceeding analysts' expectations.

Cablevision lost 28,000 pay TV subscribers in the second quarter after a year-ago loss of 20,000. The company ended June with 2.77 million video subscribers and 3.17 million overall subscribers. Total user losses of 21,000 compared with a year-ago loss of 11,000.

Cablevision lost 9,000 broadband and 7,000 phone customers in the latest period. In the year-ago period, it had 1,000 and 3,000 of those subscribers, respectively.

Analysts said that competition from Verizon FiOS was likely one factor behind the subscriber trends.

Said CEO John Dolan: "Cablevision generated solid financial results in the second quarter, including year-over-year growth in adjusted operating cash flow and free cash flow." He added: "We look forward to continuing our progress in the second half of the year and creating shareholder value over the long term."

On an earnings conference call, Dolan said he expects that broadband subscriptions can continue to grow over time despite the drop in the quarter. He said that broadband services are now "more important" to consumers than video, and a result, Cablevision wants to be the leading connectivity firm. 

Other cable TV industry executives have also said that broadband service has become the core offering for industry players.

Asked about possible consolidation between content companies and the effect that would have on Cablevision, Dolan said he was only aware of one suggested deal. (That was believed to have been a reference to 21st Century Fox's recently rejected bid for Time Warner.) "There is not much there at the moment," Dolan said.

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