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Cablevision Systems Corp. (NYSE:CVC)

Q4 2008 Earnings Call

February 26, 2009 10:00 am ET

Executives

Patricia Armstrong – Senior Vice President Investor Relations

James L. Dolan – Chairman of the Board

Thomas M. Rutledge – Chief Operating Officer

Michael P. Huseby – Chief Financial Officer & Executive Vice President

Josh Sapan – President and Chief Executive Officer of Rainbow Media

John Bickham – President of Cable & Communications

Gregg Siebert – Executive Vice President

Analysts

Ingrid Chung – Goldman Sachs

John Hodulik – UBS

Douglas Mitchelson – Deutsche Bank Securities

Tom Egan – Collins Stewart

Craig Moffett – Sanford C. Bernstein

Jason Bazinet – Citigroup

Jessica Reif Cohen – BAS-ML

Jason Bazinet – Citigroup

Matthew Harrigan – Wunderlich Securities, Inc.

Operator

Good morning. My name is [Tamika] and I'll be your conference operator today. At this time, I would like to welcome everyone to the Cablevision fourth quarter earnings conference call. (Operator Instructions). I would now like to turn the call over to Pat Armstrong, Senior Vice President, Investor Relations.

Patricia Armstrong

Thank you. Good morning and welcome to Cablevision's Fourth Quarter 2008 Earnings Conference Call. Joining us this morning are members of the Cablevision Executive Team, including Jim Dolan, our President and CEO, Tom Rutledge, Chief Operating Officer, Mike Huseby, Chief Financial Officer, Josh Sapan, President and CEO of Rainbow Media, John Bickham, President of Cable & Communications, and Gregg Siebert, Executive Vice President.

Hank Ratner will not be here today. He's recovering from minor surgery.

Following a discussion of the company's fourth quarter 2008 results, we will open the call for questions. If you don't have a copy of today's earnings release, it's available on our website at cablevision.com. This call can also be accessed via our website.

Please take note of the following; this discussion of Cablevision's results may contain statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that any such forward-looking statements are not guarantees of future performance or results, and involve risks and uncertainties that could cause actual results to differ. Please refer to the company's filings with the Securities and Exchange Commission for a discussion of risks and uncertainties.

The company disclaims any obligation to update the forward-looking statements that may be discussed during this call. Let me point out that on page six of today's earnings release, we provided consolidated operations data and a reconciliation of adjusted operating cash flow, [abbreviated CF], as operating income.

I will now turn the call over to Cablevision's President and CEO, Jim Dolan.

James L. Dolan

Thank you, Pat, and good morning. Cablevision delivered strong results for 2008, despite the economic downturn. For the full year, revenue growth at all three of the company's key business segments, Cable, Rainbow, and MSG, plus the additional Sundance and Newsday, helped drive the company's consolidated revenue for the first time to more than $7 billion.

Meanwhile, full year AOCF grew by 10% to $2.3 billion. Also worth noting for 2008, is that Cablevision generated more than $500 million in free cash flow, which was over three times the free cash flow of 2007.

During the last quarter of 2008, our Cable business remained largely resilient; yet the adverse economy had some impact on other parts of our businesses. Rainbow, even with some ad sales softness in the fourth quarter, still had a good advertising year. MSG Entertainment experienced lighter ticket sales for our winter theme productions during the fourth quarter, and Newsday, with its heavy dependence on advertising, felt the impact as well.

With that said we are pleased with our performance for the year and we'll move forward with strategy to create sustainable, long-term value for our shareholders. For now, that means focusing on maintaining our solid operating performance and growing our businesses. We are moving forward with strategic projects, such as our Wi-Fi build out and our original programming investments at Rainbow. These projects are part of our commitment to providing even better products and services to our customers now and in the future.

We have also taken a number of steps to improve the operating and financial structure of the company. In the latter part of 2008, we announced the closing of Voom's domestic business, restructured parts of our Newsday business, and completed the sales of Life School and Sports School. We expect to see significant savings as a result of these steps.

As for our liquidity and maturity profile, I am pleased to note that we have completed two successful financings already this year, even with the very challenging credit markets. Greg Siebert will talk more about this in a few minutes. And finally, our board of directors has approved another $0.10 per share dividend payable at the end of March.

I would now like to turn the call over to our Chief Operating Officer, Tom Rutledge, who will address our Telecom business, as well as Newsday.

Thomas M. Rutledge

Thank you, Jim and good morning. Overall, our Cable business continued to produce excellent results for the full year, as well as in the fourth quarter of 2008. Cable operations gained 653,000 RGUs in the year, with a 9.1% annual revenue growth and AOCF growth of 10.7%. Customer relationships increased by 8,000 in 2008.

In the fourth quarter, we added 101,000 RGUs, contributing to Cable revenue growth of 7.4% and AOCF growth of 4.1%, compared to the prior year period. AOCF growth was less than in prior quarters due to costs associated with carrying Voom, which was discontinued in mid-January and by softness in the advertising market.

As Jim mentioned, our Cable company fared well in the last quarter and through all of 2008, despite the weak economy. Metrics such as non-pay disconnects, total revenue per sub, and new sales obtained quite consistently throughout the year and churn has remained stable as well.

The Cable business is historically contra-cyclical, we expect a good 2009, in fact, the first quarter to date has exceeded last year's first quarter subscriber growth at the same point in time. Our average monthly revenue per subscriber or RPS is $134.85 for the fourth quarter, up $1.74 sequentially, $9.75 over last year's fourth quarter, which was a 7.8% increase.

We gained 101,000 RGUs in the quarter and had a net loss of 3,800 basic subscribers. We saw across the board gains in all of the categories once again. With digital video already in excess of 90% penetration, the basic fourth quarter growth was 23,000. Our Optimum Online service gained 28,000 new customers, and Optimum Voice grew by 53,000 in the quarter. We have now reached 40% voice penetration to passings across our entire footprint.

At year end, 58% of our video customers subscribed to all three of our online services. Our high definition video subscribers totaled nearly 1.5 million at year end, an increase of 44% over the past year, reflecting continuing strong demand for our high definition product.

Today, Cablevision provides 70 high definition programming services to our customer base and our goal is to systematically add more HD programming to our channel lineup in the coming months. We continue to build out our Wi-Fi network and make good progress. We've pursued this strategy at the same time mobile internet devices like the iPhone, iTouch, and Blackberries are exploding in usage, all of which are optimized with our Wi-Fi network. Our next scheduled launches will be in New Jersey as we continue to extend our Wi-Fi network deeper into our footprint.

We've also nearly completed the DOCSIS 3.0 wideband deployment across our service area as part of Wi-Fi rollout and we expect to make an announcement shortly related to a wideband product for both residential and business customers that will extend the Optimum Online standing to the best and most highly penetrated broadband service in the country.

Turning to our business services, we continue to see strong results from Optimum business, revenues from data and voice services have grown more than 40% since last year's fourth quarter. At year end, we had activated more than a quarter million voice lines to the small and medium business group.

We actually believe that the state of the economy could be helpful here, prodding more and more businesses to look for a better value property.

As we said last quarter, we passed 20% penetration to the small business available in our footprint.

Quick update on Telco competition, we estimate the drive to built out plans is approximately 1.5 million homes as of December 31st, of this total we believe they have approval to offer video services to about 1.4 million of those homes.

Optimum Lightpath, which serves our larger commercial customers, also continues to generate strong financial results, with revenue growth of 16% and AOCF growth of 21% in the quarter, as compared to prior year period.

As you can see, the business customer is becoming more and more prominent in Cablevision's performance. There's a significant upside potential in this sector and we look forward to becoming a bigger player.

In summary, we continue to have the best products at lower prices than our competitors during these tough times. We focused on consistently offering attractive products and services at great values. The majority of our video customers now have all three of our products and we're quickly building out our Wi-Fi network. We're gaining traction in the business segment of our footprint and we have the momentum to continue to grow in 2009.

Shifting to Newsday, total revenue for the fourth quarter was $107.1 million and AOCF for the quarter was $10.3 million. When we purchased Newsday, we were aware of the long-term issues facing the traditional newspaper industry. Our goal was and is to use our electronic network assets and subscriber relationships to transform the way news is distributed.

We plan to end distribution of free web content and make our news gathering capabilities service our customers. I would now like to turn the call over to Josh Sapan, who will discuss Rainbows results.

Josh Sapan

Thank you, Tom. Fourth quarter revenue at AMC, WE TV, and IFC up 7% to $191 million and AOCF up for the quarter was $85.6 million an increase of 7% as compared to the prior year. The revenue growth for the quarter included 9% increase in the affiliated revenue and a 3% increase in ad revenue in what has been a tougher ad market due to the economy.

The increase in AOCF was primarily driven by this higher revenue, partially offset by higher programming costs versus the fourth quarter of 2007. Our pursuit of quality original programming paid off well in 2008 led by the positive reception to our series "Mad Men" and "Breaking Bad" on AMC.

On a full year basis AMC’s prime time ratings delivery was up 7% for adults 18-49. WE TV had a very strong ratings increase up 39% for our target of women 18-49 for the full year 2008 versus 2007. This led to double-digit advertising revenue growth for both services on an annual basis.

Turning to Rainbow's other programming businesses, which primarily include the Sundance channel, News 12, channel HD network and IS entertainment, revenue increase 36% to $79 million and the AOCF deficit improved by 13% to a deficient of $19 million as compared with the same quarter a year earlier, these variances were primarily driven by addition of Sundance channel results for the full period. I’d now like to turn the call turn back over to Jim Dolan, who in Hank's absence, will be discussing results from Madison Square Garden.

James L. Dolan

Thank you, Josh. Turning to MSG's operating results, fourth quarter revenue totaled $406 million down 2% versus the fourth quarter of 2007, AOCF for the quarter was $28 million, which was a decline of 65% compared to last year’s fourth quarter.

These results were primarily driven by lower net revenue of $20 million for our winter theme shows as the down turn of the economy was evident and the lighter ticket sales throughout the holiday season. Other entertainment events, such as concerts and family shows, saw a reduction in revenue of $8 million, largely due to fewer events than the prior year’s fourth quarter.

The teams reflected higher revenue in the quarter of $7 million versus last year’s fourth quarter, but expenses were higher by $20 million, primarily due to personnel transactions and compensations. And the network saw higher revenue primarily due to a $12 million increase in affiliate fees.

In addition, MSG Media retailing received 55 nominations for the New York Emmy awards, tying our record set last year and more than any other television network in New York. Again this year, Billboard the industry’s leading trade magazine ranked the Garden and Radio City Musical Hall number one in the country for venues of their size.

On February 13th we reopened the famed Beacon Theatre, with a Paul Simon Concert following a seven month restoration. The restoration was very well received and features dramatic improvements to all of our interior public spaces, as well as an upgraded sound system and acoustic new lighting and new seats. I will now turn the call over to Mike Huseby, who will briefly cover the company’s overall financial position.

Michael Huseby

Thank you, Jim. For the full year 2008, Cablevisions consolidated net revenue increased 11.5% and AOCF increased 10.1% as compared with 2007. These results primarily reflect the strong growth from our telecomm and Rainbow business highlighted by Tom and Josh.

The results of Sundance and Newsday from their respective acquisition dates are also included. Capital expenditures for 2008 totaled $909 million, 16% higher than 2007 levels. Included in 2008 CapEx was the first phase of our Wi-Fi investment of $66 million, as well as certain other important projects, such as high definition expansion and video on demand expansion.

We are maintaining a fairly consistent ratio of consolidated CapEx as a percentage of revenue. In 2007 that ratio was 12% and in 2008 it was 12.6% even after these important new operational investments are included. Despite this increase in capital spending, we generated free cash flow $507 million in 2008 compared with $158 million in 2007, a very healthy increase.

For the fourth quarter total consolidated revenue increased 11.4% over the prior year, while AOCF declined by .9%. Both revenue and AOCF benefited from our 2008 acquisitions, as well as positive contributions from our Telecom and Rainbow businesses offset by lower AOCF and MSG.

Next Gregg Siebert will provide an update on our leverage and liquidity.

Gregg Siebert

Thanks Mike. With respect with leverage and liquidity, the company’s consolidated cash position year end was $323 million and net debt was $11.2 billion. At December 31st CSC holdings $1 billion revolving credit facility was unused with the exception of $55.5 million, which is restricted for outstanding letters of credit.

At December 31st the company consolidated leverage ratio was 4.8 times and the CSC holdings for stricter group leverage ratio was 4.3 times. RNS had approximately $1.3 billion of debt and $355 million undrawn on its revolving credit facility at December 31st and the ratio under the RNS bond leverage desk was 3.8 times.

As Jim mentioned, during first quarter at Cablevision successfully executed two separate financings at the CSC holdings level. The proceeds from these financings, together with cash on hand and cash flow generated from operations, should be more than sufficient to satisfy our 2009 maturities of approximately $1.7 billion while retaining or revolver capacity.

The first financing generated cash proceeds of approximately $750 million through the issuance of five year senior unsecured notes in early January at an effective yield of 11 3/8 %. The second financing on February 12th generated cash proceeds of approximately $500 million through the issuance of ten-year unsecured notes at a yield of 9 3/8%.

These ten-year notes of the longest maturity in our capital structure and reflect our desire to lengthen our company's over all maturity profile and to avoid the bunching of large maturities. As a follow up to these offerings, on February 13th we launched the cash tender offer for all of our outstanding notes due in 2009.

Finally, I’d like to mention that we’re planning visits with investors in then near future to continue to dialogue that began last call. We’re greatly looking forward to these discussions. Operator I think at this point we're prepared to open the call for questions.

Questions and Answers

Operator

(Operator Instructions) Your first question comes from the line of Doug Mitchelson – Deutsch Bank.

Douglas Mitchelson – Deutsch Bank Securities

Tom, just looking for clarification; you went through it pretty quickly, but you said the fourth quarter costs were pressured by Voom. What was different between say three Q and four Q, because you did see some pretty good cost acceleration in the fourth quarter?

And when you look at 2009 can you give us a sense of what you think operating costs might grow for the cable group?

Thomas M. Rutledge

Well I’m not going to forecast 2009 costs or say anymore about 2009 than I already have. But Voom was not in our plan for the fourth quarter and we decided to keep those costs in because we kept the service on as we were sorting out what to do with the product, so those costs were unplanned and exceeded the prior fourth quarter for 2007, where the Voom costs were in a sustainably lower rates and with substantially less HD customers.

Douglas Mitchelson – Deutsch Bank Securities

If you can’t speak to 2009 cost can you answer instead – since you’re already scaled in small medium sized business with greater than 20% penetration that you mentioned over 250,000 customers. Are you seeing margins on the small medium size business that are similar to what you have in consumer Telecom?

Thomas M. Rutledge

Well as I said in the last call that our RPS approximated $130 for small businesses and the margins are actually substantially higher than the cable business. No programming costs essentially.

Operator

Your next question comes from Jessica Reif Cohen – Bank of America Merrill Lynch.

Jessica Reif Cohen – BAS-ML

A couple things, first it’s just a follow-up to Doug’s questions, could you break out SME from the residential numbers? And on the RPU how much of the fourth quarter was promotions was there any trade down in packages? Maybe just as an overall question, if you could discuss the competitive dynamics on that and on into fourth quarter and what you’re expecting for 2009.

And just a completely spate question can you break out the fuse loss and where was it in ’07? Was it in MSG or was it in Rainbow?

Thomas M. Rutldege

So with regard to SME break out we don’t break it out, we’ve given you some color in the conversations we’ve had here about what’s it’s doing but the – and the SME lines are not broken out as individual lines so we announced some time ago even though we have 1.9 million residential customers for Voice that the lines in small business is included in that, and that we actually exceeded 2 million lines totally.

And today we said that we had over a quarter of a million small business lines but we include those customers as RGUs in our basic reporting. In terms of discounted packaging, we’re really not changing our marketing strategies. We’ve continued to spend marketing dollars and in fact we’ve actually accelerated marketing spending because we think that we have better products than our competitors and that they cost less they work better and that we have an opportunity to actually grow here in an environment where people are watching their money.

But in terms of discounting packages, there’s not a substantial change in our strategy there.

James L. Dolan

As far as the fuse question goes I don’t think we break out fuse.

Thomas M. Rutledge

No we don’t break out fuse.

James L. Dolan

But it is in Madison Square Garden. For all periods presented which we disclosed in the earnings release. There will be more information in the 10-K.

Operator

Your next question comes from the line Craig Moffett – Sanford Bernstein.

Craig Moffett – Sanford Bernstein

Two questions, Jimmy, given the change in the economic back drop is there any change in your expectation of the redevelopment of Madison Square Garden and how does that hit your capital spending projections for the next couple of years. And then for Mike, as you look out to 2012 I know it’s still a bit out on the horizon, but can you talk a little bit more about the maturities that you’ve got in 2012 and do you expect to be taking steps to try to refinance any of that during a period when it looks like the debt markets are at least relatively opened right now?

James L. Dolan

The – in regards to the renovation that there’s no changes to announce at this time, however, we are still really in the middle of the planning process doing value engineering, etc. So I’m – so no changes.

Craig Moffett – Sanford Bernstein

I can go over there with a can of paint if it will help.

James L. Dolan

Sure come on by.

Gregg Siebert

Craig, I’m going to just address quickly your question on maturity and capital structure and as I think you can see by the actions we've taken so far this year, we take liquidity in the capital structure very seriously. The financings we did on address our 2009 and maturity we don’t have material maturities until 2010, but as we get out to '11 through '13, '12 in particular we do have significant maturities.

We’re highly focused on trying to extend the maturity profile of the company and to avoid the type of bunching that we have in 2012. That said with term loan A and term loan B representing significant portions of those maturities, that’s relative low cost debt today.

On one case at LIBOR plus 100 I believe, and in another net LIBOR plus 175. There are some CVC bonds maturing in 2012, $1 billion worth, which is somewhat higher cost debt but I think the way that we look at our capital structure is we’re going to continue to monitor the markets, be opportunistic and I certainly don’t anticipate that we’re going to get to 2012 without having addressed at least some of that maturity profile.

Operator

Your next question comes from the line of Jason Bazinet – Citigroup.

Jason Bazinet – Citigroup

Regarding files am I correct that pace of incremental build of files in your footprint appears to be slowing and then second, on the digital side would you characterize the incremental penetration of digital as forced conversions that are still occurring or sort of the very tail end of sort of true pull based demand on the part of consumers? Thanks.

Gregg Siebert

As far as the pace of restricting it was – it’s been fairly steady about 7% of our passings on a year over year basis there is some cyclicality to it and it’s hard to say whether it has changed its pace, so I can’t tell you that I can clarify – I can’t clarify that it's changed but this time of year it is slower.

And with regard to digital, we have changed our lineups and freed up spectrum using [boxes], but all of our digital customers eventually are paying us for their digital RGUs. There is still demand – from a demand perspective we don’t sell anything but digital services, essentially, on new orders.

So you still have organic growth but there is we’re up to the 90s now in terms of percentage of penetration and at some point we’ll finish that off through a complete conversion and be 100% digital. We’ve already gone 100% digital in New York City.

Operator

Your next question comes from the line of Tom Egan – Collins Stewart

Tom Egan – Collins Stewart

Thank you very much. Two quick questions, first on Rainbow, I guess if you could give us a little bit of detail on the potential cost savings with the sale of the VOD networks, Sports School and Life School and the eliminations of Voom in ’09, just what that cost savings may be.

And then I have a follow up on CapEx.

Thomas M. Rutledge

Well as we mentioned we sold Life School and Sport School and we shut down domestic operations of Voom, so those will provide economies that are substance in the overall Rainbow financial picture.

Tom Egan – Collins Stewart

Okay. And then in terms of CapEx, if you could provide Tom, maybe a little bit of detail on the increase in the scalable infrastructure in the upgrade of CapEx for the fourth quarter and then just remind us I guess what the expectations are for the wireless CapEx and MSG for ’09.

Thomas M. Rutledge

Well if you look at our CapEx as a percentage of revenue, it’s fairly flat even though we’ve increased CapEx for this Wi-Fi roll out we’ve said that we would spend approximately $300 million on the Wi-Fi roll out and we’re into that project about a third of the way through it.

That is going to cost about $100 a customer $70 of passing and we see that going on for at least into 2010. But the rest of – in that scalable infrastructure is also a wideband project which we’ve included in that $300 million cost for the Wi-Fi rollout, so there will not be a separate capital expenditure necessary for the launch of super high speed data products.

Operator

Your next question comes from the line of Ingrid Chung – Goldman Sachs

Ingrid Chung – Goldman Sachs

My first question is for Tom and my second question is for Gregg. For Tom, I was wondering you did have pretty good sub metrics in the quarter, I was just wondering if you could speak to your year-over-year churn activity, down grade activity and advanced services take rates.

And then for Gregg, given your extensive background as a banker, I was wondering what your priorities are in joining Cablevision and I was wondering if you could characterize your strategic focus for the company.

Thomas M. Rutledge

Well with regard to churn, as I said in my comments, churn is not significantly different throughout the year and it’s not significantly different than last year, so we’re actually quite pleased with the tented capability of our Triple-Play product and our general cable service.

There doesn’t appear to be any significant change at all in any of our metrics with regard to the economic situations.

Gregg Siebert

And Ingrid, in answer to your question, my focus right now is primarily on the balance sheet. As you see, between Mike and the rest of the finance team, we have pulled off two, what I think are very, relatively attractive financings given the environment, 9 3/8% ten-year money, in my mind is still expensive, but given the environment it was a good deal for the company. So our focus right now is really going to be focusing on maintaining the strong operating performance, and at the same time, managing the liquidity and capital structure.

Certainly given the environment, we'll remain open to considering compelling opportunities that may or may not arise, but at this point we're highly focused on liquidity on our balance sheet.

Operator

Your next question comes from the line of John Hodulik – UBS.

John Hodulik – UBS

Thanks, good morning. Tom, it seems like you and then some of your other Cable brothers have been saying that the first quarter's start off to – had a good start here, despite the fact that obviously, on a year-over-year basis, the economy's much worse. What do you attribute that to? Is it a change in the competitive environment? Maybe Verizon may be pulling back a little bit or if you could give us some color there.

And then secondly, I take it the launch of the ultra-wideband service, is it sort of a first half event? Do you expect that to be a real driver to the business? I mean obviously, a lot's going to depend on pricing, but do you think that you're going to see what you come to market with, affect the second half? Thanks.

Thomas M. Rutledge

I don't think ultra-wideband will have a significant impact in the second half. I think it's a long-term strategy, I think the primary user is small business and not residential in the short run and it gives us the ability though, to provide a higher quality product to our existing customers and increase the satisfaction.

So I think ultimately, it's about having really good products for your customers and having really good customer service, and wideband allows us to manage our network more effectively than we do today, and continue to improve our subscriber relationship, which ultimately translates into lower churn. So it's not a transformative factor in our business, but it is a continued effort on our part to improve the way we sell and market and service our customers.

And in the long run, it'll make our business our sticky and continue to allow us to generate the free cash flows that we anticipate out of the business. What was the first part of your question?

John Hodulik – UBS

Just the strong start to the first quarter here.

Thomas M. Rutledge

Well I mean Cable's good. Cable is better than satellite by far, and when you look at a Triple-Play package and you look at what the value proposition is for data, voice, and television, you get better TV, you get better data, you get better voice than you can get in a satellite phone combination. So that value proposition's still there. So the question, would somebody want to give all that up in a down market, then the answer is no.

If you're sitting at home with nothing to do, do you really want to have no internet, no phone and no television? And I think the answer to that is no and it's the last thing to go.

John Hodulik – UBS

Right, it sounds boring. Thanks.

Patricia Armstrong

Operator, we'd like to take one more question please.

Operator

Okay, and your final question comes from the line of Matthew Harrigan – Wunderlich Securities, Inc.

Matthew Harrigan – Wunderlich Securities, Inc.

Two questions, first of all, can you talk about possibly integrating the classified operations at Newsday with Optimum Automotive and Optimum Real Estate? And also, on the [Waterloo] side, obviously, the Wi-Fi measure was a very attractive residential product and it helps in the SME side as well. But how hard now do you feel on Lightpath, as you get more mobile [4.0] migration for businesses?

Thomas M. Rutledge

Well, with regard to Newsday, we have begun an integration process with our classified advertising on television and classified advertising in the paper on Long Island. So we have integrated Optimum Autos with the Newsday classified section for autos and we've rebranded the Newsday section as Optimum Autos, and we're now selling packages that include paper placement and on television placement, including interactive television advertising, that is all branded under the Optimum Autos name.

It gives us an opportunity to provide a service for an advertiser, and reach the advertiser's potential audience in a variety of different media. And so that's ultimately the value of what Newsday offers to us, Newsday is a product that is essentially news at its core, it has a great journalistic staff there that is able to cover Long Island, and that product can be distributed both physically in the form of a paper, and electronically on television and or through our online services. And so we see continued integration as a real opportunity for us to transform that business.

In terms of wireless, we continue to build out the Wi-Fi network, it is free to our customers, it adds a tremendous value, it makes our products sticky, it allows customers to bypass their wireless carriers, and to get high speed data on all of their instruments, whether they be PDAs or whether they be laptops. And Lightpath strategy is integrated into our overall data strategy and small business strategy. Lightpath's target is large business; large businesses need Wi-Fi products inside their businesses and outside, and we're attacking the business marketplace from two directions. We're attacking it from the bottom with our cable company Optimum business product, and we're attacking the larger business with Lightpath, which is a completely separate, all fiber optic network. Both networks will be integrated into our wireless network.

Matthew Harrigan – Wunderlich Securities, Inc.

So you feel that the Wi-Fi mesh overlay is adequate for Lightpath for the foreseeable future?

Thomas M. Rutledge

Yes. Yes I do.

Patricia Armstrong

Okay, that concludes our call. Thank you all for joining us today.

Operator

This concludes today's conference. You may now disconnect.

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