Digital Data Drives Cablevision’s Outlook

Emboldened by higher-than-expected response to its broadband and digital
video services, Cablevision Systems is calling for revenue
growth of between 12 percent and 14 percent from those business lines in
2003.

Helped in part by close to 170 percent growth in its digital video and
VOD subscribers in the fourth quarter, the Bethpage, N.Y.-based Cablevision
said it expects its overall cash flow of between 18 percent and 20 percent in 2003.

During year-end quarterly results and discussion of its data
services numbers, which one analyst called “astounding,” the cable company
said high-speed data customers in the fourth quarter totaled 770,125, up
13 percent from the third quarter of 2002.

“The high-speed data product has become a huge success and should
continue to drive results forward throughout 2003,” wrote Merrill Lynch
media analyst Jessica Reif Cohen in a note published soon after the results
were released Tuesday.

Although the company lost about 5,300 of its 3 million basic cable
subscribers during the period, customers upgrading to digital set-top boxes
and digital services more than made up the difference.

Cablevision’s digital video subscriber numbers for the quarter blew away
most analyst expectations, growing to 216,000 customers by the end of the
2002. That represents 136,000 new digital video customers during the
quarter, a growth rate of about 170 percent from the third quarter.

Cablevision’s cash flow (earnings before interest, taxes, depreciation
and amortization), from its telecommunications division, which includes
high-speed data services, video-on-demand products and some telephony
products, grew by 19 percent to $252 million. Stronger than expected demand
for broadband and VOD services helped drive the growth.

The improved outlook for the year followed the company’s fourth quarter
results, which included net income of $517.4 million, compared to a net loss
of $281.6 million in the same, year-ago quarter.

Revenues were $1.2 billion, up by an estimated 4 percent (using a
similar yardstick to compare with the same, year-ago period), the company
said.

In addition to better than expected growth in broadband and VOD
customers, the results reflected a year of cost-cutting, including laying
off over 3,000 employees, selling off its wireless licenses through its
Northcoast affiliate, and yesterday’s announcement that it would sell off
its stake in TheWiz, the consumer electronics retailer struggling to recover
from a bankruptcy filing.

The price of set-top boxes has also fallen, company officials noted as another factor helping to improve return on investment in the cost of upgrading cable plants to deliver digital and interactive services to customers.

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