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Verizon's FiOS effect on Cablevision still invisib


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Verizon's FiOS effect on Cablevision still invisible

Feb 26, 2009 11:51 AM, By Sarah Reedy

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Cablevision has been competing with Verizon’s FiOS television offering for the past three years, and every quarter the cableco has proven resilient to its telco competitor, even as Verizon continues to grow its footprint, adding more subscribers than its competitors, including Cablevision, this quarter. According to Bernstein Research senior analyst Craig Moffett, even the economy hasn’t yet changed the tune for Cablevision.

The company added 22,800 digital video subscribers, 28,200 high-speed Internet subs and 53,400 phone users in its three markets -- Connecticut, New Jersey and New York -- in the fourth quarter. Cablevision’s fourth-quarter earnings did include a loss of $321.4 million compared to a year-earlier profit of $8.6 million, due in part to the loss it incurred from its acquisition of Newsday last year. But for its telecom division, Moffett called Cablevision’s growth rates for revenues, EBITDA, free cash flow and even earnings “remarkable.” As for Verizon’s impact, it’s nowhere to be seen, he said.

“As has been the case for quarter after quarter, the impact of FiOS is all but invisible,” Moffett wrote in a research note. “Cablevision continues to grow in every facet of its business. Consider, for example, that its broadband penetration is now a spectacular 52% of homes passed, and phone is now at 40%, suggesting that it may well have passed Verizon as the largest phone provider in its footprint (assuming that close to 20% of homes in footprint are ‘wireless only’). We continue to believe that Cablevision's small-and-medium business initiatives are the secret sauce that allows it to continue growing in the face of a relentless expansion by Verizon FiOS.”

Cablevision offers its small and medium business customers up to 12 lines of phone service, including flat-rate unlimited local and long-distance calling. When asked what he attributes the positive quarter to, Cablevision president and chief executive officer James Dolan said simply that cable is better by far than satellite.

“You look at a triple-play package and what the value proposition is of data, voice and television,” he said. “You get better TV, you get better data and voice then you could get in satellite combination. That value proposition is still there, so the question is, will someone want to give that all up in a down market? The answer is no.”

Still, Cablevision, which raised prices along with its competitors at the beginning of the year, saw its marginal growth rate slow in its core cable business this quarter – also like most of its competitors. The growth was, however, in line with or better than consensus predictions, Moffett said. Through most of last year, the New York market held up well despite the credit crunch, but that is starting to change as Wall Street continues to collapse. Second homes, which have borne the brunt of the housing-market contraction, have been a major component of Cablevision’s base in eastern Long Island and the New Jersey shore. With fewer occupied homes to serve, Moffett predicts that this, not competition, will be the cause of a not-uncalled-for cyclical slowdown in 2009.

“Ironically, after years of waiting for – and not finding – the competitive fingerprints of FiOS in Cablevision's numbers, it may instead turn out to be the contraction of the New York area housing market that trips up Cablevision in 2009,” he said.
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