Cablevision (NYSE: CVC) CEO James Dolan said Verizon FiOS (NYSE: VZ) is an "unprofitable business" that is having "minimal impact" on his MSO after it added 5,000 overall customers to its ranks in the second quarter.
It was Cablevision's best performance in the three-month period in more than two years. The Long Island cable company reported net revenue increases of 1.6 percent to $1.65 billion in the quarter, in line with analysts' consensus forecasts. Video subscriber losses notably decelerated to 16,000, down from 28,000 in the second quarter of 2014 and 37,000 in the second quarter of 2013. Cablevision added 14,000 broadband customers during the quarter.
FiOS' competitive overlap with Cablevision has caused media analysts to question the MSO's viability as a takeover target, with one analyst even calling the cable company an "un-acquirable asset." During Cablevision's second-quarter earnings call, however, Dolan dismissed Verizon's ability to sustain its expansion in the New York/New Jersey footprint in which Cablevision operates.
"We believe Verizon FiOS is an unprofitable business, and we doubt that they will ever be profitable," Dolan said.
As for the customer growth, Dolan attributed it to improvements in network reliability, noting that Cablevision has cut truck rolls in half since 2012. Customer calls have been reduced by 30 percent over that same period, he said.
Evercore ISI, meanwhile, released a note to investors that attributed the subscriber growth to promotional packages, a strategy the MSO swore off last year.
"Our channel checks indicated that Cablevision was aggressive with their promotions during the quarter and from the results it seems like it yielded results on the subscriber side," the Evercore note said. "This is a shift in strategy from Cablevision, which had stopped chasing promotion-hopping and price-chasing subscribers. We think that the strong operational performance was due to the launch of the cord-cutter package, which includes a free digital antenna and a broadband connection costing between $35/month and $45/month. Cablevision was also offering a $85 triple play bundle with a 2 year price guarantee."
Cablevision's average monthly revenue per basic subscriber, meanwhile, grew by 7.2 percent in the quarter to $187, in line with analysts' forecasts.
Just in case investors weren't sure, Dolan culminated today's call by reiterating Cablevision's position that broadband growth should be a priority over video.
"For us, it's not about capturing the video customer. For us it's about connectivity," he said. The over-the-top future, he added, may take five or 10 years to arrive, "but the very best way to get that is with Cablevision and our connectivity products."
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