Cablevision loses customers, but has faith in Wi-Fi
Cablevision Systems reported lower net income but an increase in net revenue in its second quarter, compared to its second quarter in 2013. That was despite a loss not only of video customers but of total customer connections, as Verizon FiOS enticed subscribers away with offers of the triple play priced as low as $69 a month.
Nonetheless, Cablevision said revenue per customer was up, though that was offset by loss of total number of customers.
[Cablevision requested it be noted that net income was down due predominantly to income from discontinued operations. The Q2 2013 net income included $107.5 million in discontinued operations, which included a benefit from the VOOM litigation settlement and income related to the sales of Bresnan and Clearview. The Q2 2014 income from continued operations of $91 million is actually up three-fold over the $28.2 million from a year ago.]
Cablevision also reported a strong quarter for advertising, and executives repeatedly stressed the value of Wi-Fi connectivity to its subscribers. Advertising was up 12 percent, compared to Cablevision’s Q2 a year ago.
Of note, the company is experiencing increasing demand for market data. CEO Jim Dolan on the company’s analyst call this morning said Cablevision had “the highest amount of addressable advertising in our history.” COO Kristin Dolan said Cablevision is getting new advertising customers, and that more and more of them are national brands.
Cablevision lost 28,000 video customers, 8,000 broadband subscribers, and 7,000 voice subscribers. Losing video subscribers is common, but this is one of the very few recent instances in which a cable operator has lost broadband subscribers during a quarter.
Cablevision will not match Verizon’s cut-rate prices, company executives said. Verizon is not only offering a lower price, but also touting that its broadband service is symmetrical.
Asked if that was a factor, Cablevision sidestepped the question. Technical advisor Wilt Hildenbrand said Cablevision is offering 35 Mbps on the upstream, and that isn’t going to change in the near term. “We’re not going to chase that dog around the track,” he said.
Kristin Dolan added that 35 Mbps “is way more than the average customer would ever need.”
That turned the discussion back to Wi-Fi, a subject to which Cablevision executives returned again and again on the company’s conference call.
Wi-Fi is not only popular, but it is turning into a key differentiator against competitors, Cablevision execs explained. Cablevision is highly exposed to Verizon, which can offer both FiOS and cellular.
Jim Dolan said Cablevision said, “Consumers have insatiable appetite for data, and usage keeps increasing by leaps and bounds. The data product is now more important to the consumer. Not every consumer, but the majority of consumers. If you can keep your video or your data, as long as data has a Wi-Fi component, that consumer is going to choose data, hands down. We’re building to that. That’s what we mean by being a connectivity company, and that’s why we’ll never stop our Wi-Fi build.”
In response to a question specifically about whether broadband is no longer a unit growth engine, Dolan rejected the premise and returned to how Wi-Fi will be key to the company’s data strategy. He stressed that CV has a strategic advantage “that we have not yet fully exploited, especially concerning Wi-Fi. In the end, we think that’s going to win the day, when customers decide who provides the most value and the best service. I’m very optimistic about data, which around here we’re calling connectivity.”
Kristen Dolan noted that today, Cablevision’s average customer is using 4 gigabytes a month on Wi-Fi, which she noted is twice the most popular cellular plan of 2 gigabytes a month.
On the subject of capital expenditures, the company's spending pace is behind its rate from last year, but the company expects that it will end up spending about the same in 2014 as it did in 2013.
Moffett/Nathanson notes that Cablevision’s stock value is based more in merger and acquisition potential than it does in actual performance, but Cablevision nipped that subject in the bud today, announcing at the beginning of its conference call that it would not answer any questions on the subject.
Separately, the company yesterday named Dave Dibble, formerly with Yahoo, as its CTO.