Few companies see their shares move solidly higher after posting a $63 million ($0.22) quarterly loss, but that is exactly the reaction Cablevision Systems
The number of basic cable subscribers was basically flat at 2.9 million, but the company continues to see growth in other services. For the quarter, Cablevision added nearly 75,000 Internet-based voice customers, with the total growing to almost 190,000 versus only 5,000 at this time last year. It also picked up 171,000 digital video subscribers and 80,000 new high-speed Internet customers, bringing those totals to 1.3 million and 1.2 million, respectively.
The company now boasts the highest digital video penetration rate (45.3%) and high-speed data penetration rate (28.4%) in the industry. The combined number of customers for each of these services, an aggregate measure known as revenue generating units (RGU), improved 6% from the second quarter and has risen 22% year over year to reach 5.7 million.
By comparison, Comcast
Cablevision's other divisions also reported solid results, including a 20% increase in revenues at Lightpath, the company's business services unit, and a 58% surge at Rainbow Media. That subsidiary -- which is scheduled to be spun off soon -- posted revenues of $236 million, driven by healthy double-digit gains in the three core networks (AMC, IFC, and WE) and a 147% spike in the Fox Sports Net regional networks. Adjusted operating cash flows for the segment jumped 39% to $92.6 million.
However, income fell slightly at Madison Square Garden, owner of the New York Knicks, the New York Rangers, and Radio City Music Hall. Losses also continue to mount at Voom, with the satellite TV unit reporting a steep operating loss of $75.3 million on a mere $5.9 million in revenues. Cablevision has funneled tremendous resources to get this venture off the ground, and content development and subscriber acquisition costs continue to weigh heavily. Voom, also part of the spinoff, has only 26,000 subscribers but hopes to eventually be a formidable adversary for DirectTV
By shedding the money-losing satellite TV business and returning to its core strengths, Cablevision should return to profitability sooner rather than later. Subscriber growth in each of the company's advanced consumer services (voice, Internet, and digital cable) came in substantially above expectations, and revenues per basic customer have increased 14% over last year to $83.89. The company still has a long road ahead, but with raised forecasts projecting over 1 million new RGUs this year, it should be less rocky than the road behind.
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Fool contributor Nathan Slaughter finally entered the 21st century with a new high-speed Internet/DirecTV package, but he owns none of the companies mentioned.