Cablevision CEO Cool to 700 MHz Auction
Cablevision might skip the next spectrum auction, using partnerships with existing wireless operators to add mobile products to its bundle of services, CEO James Dolan said Tues. in an earnings teleconference. “It’s yet to be proven whether wireless is going to be an effective part of a bundle to offer to the home,” Dolan said: “We continue to study our options.” Cablevision didn’t bid in the recent auction and its controlling family withdrew from the process, though industry peers were among the biggest spectrum buyers (CD Aug 21 p8). The company Tues. reported mixed Q4 2006 results, forecasting a slowdown in subscriber additions for 2007.
Sign up for a free preview to unlock the rest of this article
Communications Daily is required reading for senior executives at top telecom corporations, law firms, lobbying organizations, associations and government agencies (including the FCC). Join them today!
Cablevision’s regional focus around N.Y., where several wireless providers operate, would make it hard for Cablevision to introduce its own service there, Dolan said. “I won’t rule out us participating in an auction, but it’s more likely we would go to one of the other options… [such as] partnering or doing some other strategic move versus building another facility in our footprint,” he said: “There are already quite a few facilities already.”
It’s prudent to take all comment in advance of auctions with a grain of salt, but one could take Dolan’s remarks at face value, Stifel Nicholas analyst Rebecca Arbogast said: “Cablevision had ventured outside its core territory earlier by playing around in the satellite TV space and didn’t do well in terms of shareholder perception there. They may feel like their wings are a little bit clipped and may want to take a more conservative course.” Meanwhile SpectrumCo, a consortium of large cable operators and Sprint-Nextel and a big bidder in Auction 66, has lobbied the FCC to include a broad range of licenses in the coming 700 MHz auction, a move seen signaling intent to participate (CD Jan 10 p5). A SpectrumCo presence in those auctions doesn’t mean cable operators will build their own wireless facilities, Arbogast said: “It’s not clear yet what the cable companies that are involved SpectrumCo really have in mind. It’s [just as] reasonable to think about that spectrum as a bargaining chip in their negotiations with Sprint-Nextel,” as a sign that those operators want to build their own wireless network.
For now, Cablevision is focusing on pushing “high margin” products such as VoIP and broadband at customers, COO Tom Rutledge told investors. Those factors’ gains should offset an expected slowdown in the number of revenue generating units (RGUs) Cablevision will add in 2007, he said: “Our RGU profile going forward will rely less on the capital intensive digital converter growth and more on the high margin voice in data services in both the residential and commercial markets.”
Competition from Verizon’s FiOS TV service has led to a 5.5% drop in Cablevision penetration in the 2 Long Island communities Verizon has been pitching hardest -- Massapequa Park and Nyack, Rutledge said. Cablevision is going after customers who switched to Verizon, just as it tried to win back DBS subscribers, he said: “We're gaining traction very similarly to what we did in the satellite arena.”
Cablevision Q4 sales rose 13.4% from a year ago to $1.7 billion. It swung to a net loss of $23.9 million from a $64.6 million profit last year on higher interest expenses and a loss from discontinued operations. Cablevision expects basic video subscriber growth of 1-2% this year and to add up to 950,000 net RGUs. It expects $600-$650 million in capital expenditures. Analysts like the reduced capital spending planned for this year, overlooking the RGU growth slowdown. “Lighter than consensus 2007 RGU forecast appears more than offset by better than expected strong financial growth and falling capex,” Wachovia analyst Jeff Wlodarczak wrote.