Rutledge: Cablevision Can Manage Retransmission Consent

Basic Subs Down In Q3, As Operator's Cash Flow Rises

As speculation swirls that cable operators could be faced with a stiff retransmission-consent bill for News Corp.'s owned-and-operated Fox television stations, Cablevision Systems' chief operating officer told analysts that any retrans costs would not likely be shifted to customers.

On a conference call to discuss its third-quarter results, Cablevision COO Tom Rutledge, while not discussing Fox or News Corp. specifically, said that the MSO has an ample programming budget.

"We have a large programming expense budget as part of our cable business," Rutledge said on the call. "There are a lot of variables within that budget there are some people that have broadcast networks that want to monetize them, there are other networks that those same broadcast companies own. But when you look at the totality of the programming cost structure of the cable business, it's still growing although not as much as it was. There's actually some downward pressure on the rate of growth. While we have concerns about retransmission consent, we think we can manage our overall cost structure."

Cablevision, which added that the spin-off of its MSG business is on track for the end of the year, turned in another strong quarter of revenue and cash flow growth, even as it lost basic subscribers in the period.

Revenue at the Bethpage, N.Y. - based MSO rose 5.3% to $1.8 billion and adjusted operating cash flow increased 14.7% to $667.7 million in the third quarter. But basic video subscribers were down by 27,000 in the period, due to the sluggish economy and seasonality as subscribers in resort towns closed up for the winter. Digital-cable subscribers also fell by 14,300 in the period, while high-speed data subscribers increased by 19,100 and telephony customers rose by 34,000 in the period.

On the conference call, Rutledge said that the company was seeing a greater impact in subscriber losses in urban areas that have higher unemployment rates. However, he added that competition from Verizon Communications' FiOS product appears to be minimal. Verizon can offer FiOS to about 1.7 homes within Cablevision's 4.7-million-home footprint, Rutledge said. But as "green field" opportunities within that market dry up, he said the telephone company has had to resort to remarketing in existing areas.

"As your initial green field penetration is acquired, and you acquire whatever customer base that might exist, your incremental growth after that is harder to come by," Rutledge said.