Cablevision Systems Class A Earnings Call Nuggets: Competitive Environment, M&A and Cable

Cablevision Systems Corp Class A (NYSE:CVC) recently reported its second quarter earnings and discussed the following topics in its earnings conference call.

Competitive Environment

Douglas Mitchelson – Deutsche Bank North America: A question to start for Jim. Can you talk about the competitive environment? I’m trying to understand how much of the Company’s subscriber performance is due to taking price increases this year versus competition with FiOS and they reported a good quarter. So if you could try to figure what the right pace of growth is looking forward?

James L. Dolan – President and CEO: I’m not sure I understand that question.

Douglas Mitchelson – Deutsche Bank North America: Well, you’ve noted in the past that price increases would impact your pace of sub growth because you raised prices here, but you didn’t raise price last year particularly in video, right?

James L. Dolan – President and CEO: Right.

Douglas Mitchelson – Deutsche Bank North America: And yet FiOS, I think, probably continues to creep its build-out, it’s overbuild of the footprint. So when I’m looking at the year-over-year performance in subscribers, I’m just trying to tease out how much of that might’ve been FiOS promoting more aggressively or having a bigger footprint versus just returning to normal price increases versus not having a price increase last year.

James L. Dolan – President and CEO: Well, FiOS is really not expanding their footprint. We have seen no evidence of that other than little completions of like a hundred customers here and there, nothing of that is consequential at all. As far as the impact of the rate increase, this is a good one for Kristin to answer, if she is there, let’s see if this will work. Kristin, are you there?

Kristin Dolan – SVP of Product Management: I’m here. Yeah, so on rate increases if you’re talking specifically about the sports programming increase and Optimum line increases earlier this year, as we mentioned on the last call, we’ve seen no significant pushback from customers on either one of those events.

Douglas Mitchelson – Deutsche Bank North America: Kristin, I actually had a follow-up for you, which is, you’ve made a lot of marketing changes the last 12 months or so. Can you talk through whether the benefits you had hoped for are coming to fruition, and how much further is there to go in terms of improving the marketing efforts for the Company? Any specific measures or initiatives would be helpful?

Kristin Dolan – SVP of Product Management: Yeah, absolutely. It kind of ties to your earlier question, because in the last few months we’ve been focusing really aggressively on retention marketing actually for the last eight to 12 months, and also on improving value perceptions of customers, particularly because we knew we had a lot of the investments that Jim just spoke about coming down the pike. So, those have definitely helped with retention. Also, it helped improve value perceptions and we’ve research that shows that. So, this month it’s actually one year since we relaunched the Optimum brand, and we think that’s really working and we’re also now pumping up our acquisition efforts because of all the new things that we’ve launched that we can talk about. So, we’re happy with that we’re going to keep going and we’re really pleased with the work that’s been coming out and the response to it.

Douglas Mitchelson – Deutsche Bank North America: Not to throw baseball analogies in there, but I mean, could you give us a sense of what any new thing it is in terms of the marketing shifts you’re doing?

Kristin Dolan – SVP of Product Management: Not really big, and like baseball and hockey a little more. Marketing is always evolving. It’s an interesting marketplace with competition, but our focus is really on value perception, the integration of the products for customers, seeing how they all work together, promoting Wi-Fi. So, I’d say, it’s ever-evolving as opposed to something with a definitive end.

M&A and Cable

Jessica Reif-Cohen – Bank of America Merrill Lynch: A couple of questions. I was just wondering if you could address, either, I guess, Jim or Gregg, there’s been such a big focus in the last few months on M&A and cable, or potential M&A and Cable. Just wondering, will Cablevision – how did you envision your Company playing a role in this in either direction?

James L. Dolan – President and CEO: Well, Jessica, I think our plans are to continue to proceed in terms of operating the Company in the best interest of the Company and its shareholders. That’s what we’re doing. We’re doing all things I just talked about in terms of improving service to the customers, et cetera, and we have a strategy that we’re following there. Meanwhile, I know all the noise about that, and you never say never, but other than that, we really don’t have much to say about it.

Gregg G. Seibert – EVP and CFO: Jessica, on the other side where you asked M&A in both directions, obviously, we closed on the Bresnan transaction on July 1. We’re very pleased with the way that that worked out for us. But I think you should view that as having been a limited test of moving this Company into other geographic regions. And at this point in time, in the cable business, we’re firmly committed to operating in the Northeast footprint and not expanding any further in cable. And I’d say across the board for the Company, we don’t have any acquisitions on our sights. There’s always the possibility that there might be some small tuck-in opportunity for Lightpath, but we wouldn’t expect something like that to be material. So, at this point in time, we’re out of the M&A game. We’re focused on operating – out of the buy side M&A game and focused on operating our business.

Jessica Reif-Cohen – Bank of America Merrill Lynch: Since you’ve been cleaning up so much of the Company, I mean you spun off a lot of things; you sold a bunch of things, where is Newsday in terms of strategic necessity?

Gregg G. Seibert – EVP and CFO: I recall that question coming last quarter, and I think I said that it was a core asset for us. I’m sure Jim wants to elaborate a little bit for us.

James L. Dolan – President and CEO: Well, I think we’re – we still very much believe in the Newsday asset. It’s a significant journalistic presence in our core marketplace, and gives us a great deal of opportunity both not only to talk to our subscribers but to share with our subscribers that the digital portions of Newsday as part of a benefit of a cable, their cable subscription. The business itself to me is in – somewhat in transition. But I think that there is at least a potential for a very bright future for that business…

Jessica Reif-Cohen – Bank of America Merrill Lynch: I have just last one which is sort of along the line to what Doug was just asking, but I mean to be a little more specific on; your high-speed data substantially. Why was the – were the net add so weak? Is it a competitive issue or do you think penetration is peaking or is it because of the price increases?

James L. Dolan – President and CEO: Should we go back to Kristin on that? Let’s go back to Kristin on that one.

Kristin Dolan – SVP of Product Management: It definitely wasn’t because of the price increases, and we do think we still have an opportunity to continue to grow. The quarter was an interesting quarter because we did see unusually high level of moves in the marketplace and I think the other MSOs have talked about that as well.

Jessica Reif-Cohen – Bank of America Merrill Lynch: Are you seeing any benefit from housing yet, or…?

Kristin Dolan – SVP of Product Management: We’re seeing a lot of moves, but that’s…

James L. Dolan – President and CEO: No, in housing additions, we’re not seeing that yet. Remember, Jessica, we just came out on July 1 with new speeds on the high-speed data product. So we’re hoping that that improves our performance in that area.

Jessica Reif-Cohen – Bank of America Merrill Lynch: Do you think you will see it in Q3?

James L. Dolan – President and CEO: We’re not used to making forward-looking statements.