Cablevision loses 34K video subs in Q4, revenue up 3%

Cablevision (NYSE: CVC) reported slightly accelerated subscriber losses of 34,000 in the fourth quarter, ending the three month period with 2.68 million Optimum TV customers.

The Bethpage, N.Y.-based cable operator lost 18,000 video customers during the same period of 2013 and finished that year with 2.81 million video subs. It added 4,000 high-speed Internet customers over the same period

Cablevision also reported a net revenue increase of 3 percent to $1.63 billion for Q4, and a 22.1 percent uptick in operating income to $205.8 million.

Average monthly cable revenue per customer increased by 5.3 percent, or $7.86, to $155.20 for the quarter, with revenue from addressable advertising increasing 9 percent amid an overall decline of 10 percent for the local ad market.

Wi-Fi trumps video: Cablevision chief executive James Dolan said that going forward, Cablevision will prioritize the growth of its Wi-Fi initiatives, favoring them over video services.

"Connectivity has surpassed video as primary product for company like ours," Dolan told investors.

Cablevision's programming costs increased by $25 million during Q4.

"In the area of programming, there is very little that a cable company can do to reduce its exposure in terms of increasing programming cost," Dolan said. "And there's no real way to continue to pass that on to the customer in a competitive environment. So, I expect on the video side we will expect to see reducing margins, primarily due to programming expense. On the other side, I expect that we will see increasing margins from the data side. The good news is with that--is that the consumer values the connectivity product more than they do the video product at this point."

Dolan said it's a bit early to assess the early demand for Freewheel, the company's new Wi-Fi phone and data service. 

"We are seeing some interest, really enthusiastic interest from ex-pats and from people who travel frequently outside the country," noted Cablevision COO Kristin Dolan. "Because they are able to maintain a US phone number, they don't incur any roaming charges when they're on Wi-Fi either in their hotel or, particularly in the UK, where there is a lot of Wi-Fi available and throughout Europe. So the idea of having a flat-rate US sort of bat-phone that they can use to conduct all their U.S. business is one of the interesting opportunities for us that we've uncovered as we started rolling out Freewheel."

Added James Dolan: "We believe Freewheel will be the beginning of a disruptive force to the cellular industry. As a company, we are solidifying our position as our customers' preferred connectivity company. Freewheel is a natural progression of this strategy and is the first in a series of new products and services which we intend to launch in order to better serve our customers' needs."

He downplayed Freewheel's limitations as a direct replacement for cellular calling, noting, "The bigger indication and the one that cellular companies have to truly worry about is the one I talked about before. Nobody is building connectivity using cellular. Nobody. Everybody is using W-iFi. Why is that? I think the answer to that is obvious, right? Wi-Fi is a much more efficient, effective method of delivering data between a device, a network, and a server. But technology is technology; science is science; and this is what it is. I think that in my opinion the die is cast here."

Net neutrality: Dolan downplayed the significance of the FCC's pending net neutrality plan. "As far as  net neutrality goes, like any other business the idea of more regulation is never great for us but, to be honest, we don't see at least what [FCC Chairman Tom Wheeler] has been discussing as having any real effect on our business. And so therefore we are sort-of neutral."

For more:
- visit this Cablevision investor relations page

Related links:
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Cablevision's Dolan calls 73-year-old Knicks fan a 'hateful mess'
Cablevision launches Freewheel Wi-Fi service, highlights data capabilities instead of voice