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Cablevision Systems (NYSE:CVC)

Q2 2013 Earnings Call

August 02, 2013 10:00 am ET

Executives

Bret Richter

James L. Dolan - Chief Executive Officer, President, Director, Chairman of Executive Committee and Chairman of Madison Square Garden

Gregg G. Seibert - Vice Chairman and Chief Financial Officer

Kristin Aigner Dolan - President of Optimum Services and Director

Analysts

Douglas D. Mitchelson - Deutsche Bank AG, Research Division

Jessica Reif Cohen - BofA Merrill Lynch, Research Division

Marci Ryvicker - Wells Fargo Securities, LLC, Research Division

Benjamin Swinburne - Morgan Stanley, Research Division

Philip Cusick - JP Morgan Chase & Co, Research Division

Craig Moffett - Moffett Research, LLC

Frank G. Louthan - Raymond James & Associates, Inc., Research Division

Jason B. Bazinet - Citigroup Inc, Research Division

David Carl Joyce - ISI Group Inc., Research Division

Matthew J. Harrigan - Wunderlich Securities Inc., Research Division

Operator

Good morning. My name is Christy, and I will be your conference operator today. At this time, I would like to welcome everyone to the Cablevision Second Quarter 2013 Earnings Call. [Operator Instructions] Thank you. I will now turn the call over to Bret Richter. Please go ahead.

Bret Richter

Thank you, Christie. Good morning, and welcome to Cablevision's Second Quarter 2013 Earnings Conference Call. Joining me this morning are Jim Dolan, President and CEO of Cablevision; and Gregg Seibert, Vice Chairman and Chief Financial Officer. Kristin Dolan, President of Optimum Services, will participate in the call from another location and will join us for Q&A.

Following a discussion of the company's second quarter 2013 results, we will open the call for questions. If you do not have a copy of today's earnings release, it is available on our website at cablevision.com.

Please take note of the following: Today's discussion 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 5 of today's earnings release, we provide consolidated operations data and a reconciliation of adjusted operating cash flow, or AOCF, to operating income.

In addition, please note that the results of Optimum West and substantially all of Clearview Cinemas are reported as discontinued operations for all periods presented in our news release. The operations of the Ziegfield Theatre will continue to be reported as part of our other segment.

I would now like to introduce Jim Dolan, President and CEO of Cablevision.

James L. Dolan

Thank you, Bret, and good morning. Our second quarter financial results include a significant sequential improvement in total AOCF, which was driven by our recent pricing initiatives and reduction in certain operating costs.

These results also reflect modest gains in high-speed data and voice customers and reductions in video customers and total customer relationships during the quarter.

Our subscriber results continue to reflect a multitude of factors, including the competitive environment. We believe that our ongoing investments in our products and services will ultimately enhance our competitive position. I will have more to say about that in a moment.

Second quarter 2013 total company revenue increased approximately 1% as compared with the 2012 period and by 4% as compared with the first quarter of 2013.

AOCF declined 12% versus the prior year period, but increased 26% as compared with the first quarter of 2013. Our capital expenditures for the second quarter were $18 million lower than the comparable 2012 period.

We continue to dynamically manage our capital spending, balancing investments in the improvement of our products and in our network infrastructure with our overall financial objectives.

Free cash flow was $54 million for the quarter, and on July 30, the board declared a $0.15 per share quarterly dividend, which is payable on September 5.

We completed the sale of substantially all of our Clearview Cinemas theaters on June 27. The sale of our Optimum West business was completed on July 1.

We want to thank the employees of both these organizations for their contributions to Cablevision over the years.

During the second quarter and in the last few weeks, we achieved a number of operating objectives, and I'd like to touch on a few them.

First, our new optimum program guide has now been deployed throughout our footprint. We're very pleased to have met this milestone and we plan to continue to enhance the guide as we evolve the Optimum video experience.

In July, we released a significant enhancement to our Remote Storage-DVR product. The service, which has been re-branded Multi-Room DVR is now provided in 2 storage tiers: 160-gigabit tier and a 500-gigabit tier. Both tiers allow for 10 simultaneous recordings. And like the Optimum program guide, this product is available on our existing set-top boxes. The new Multi-Room DVR also incorporates improvements to the overall platform, enhancing the performance of the product and overall quality of the customer experience.

Last month, we announced an increase in our broadband data speeds. As customers continue to add new WiFi-enabled devices to their households, their need for bandwidth is increasing. We believe that our new high-speed data tiers offer the right speeds to meet the needs of every type of user.

WiFi remains a major priority for us and customer usage continues to grow. We serve more than 1 million users through more than 90,000 access points.

These WiFi users want access to more of the content they get at home, which is why we continue to increase our TV on the go offerings.

Today, we offer more than 55 networks on Optimum TV to GO. These services extend the benefit of Optimum TV outside the home and highlight the value of Optimum WiFi.

In June, we announced an agreement with New Jersey Transit to deploy WiFi to their stations and trains. The deployment will be implemented in phases and will initially focus on outfitting major stations, including Newark, Hoboken and Secaucus.

These initial phase is expected to be completed by the end of this year. The project is expected to be substantially complete by the year end of 2016.

We are also working with New York City and Time Warner Cable to deploy WiFi in 32 parks across the 5 boroughs. Optimum customers will be able to access New York City parks' WiFi free of charge at all times.

Our investments in our data and WiFi networks will allow us to continue to position Optimum Online as the best high-speed data choice in our marketplace.

Finally, our efforts to improve the overall efficiency of our operations are beginning to produce positive results.

For instance, we have experienced significant reduction in truck rolls and trouble call volumes, while increasing overall customer satisfaction.

In addition, we recently launched a new and improved version of Optimum.net, which includes a new online bill pay interface. We are reinventing the online Optimum experience by creating a single targeted easy-to-use destinations for all things Optimum.

Looking ahead, we will continue to focus on improving the overall Optimum experience. With the right combination of superior products and the highest level of customer service, we believe that this will drive our success over the long-term. And while delivering the highest quality customers' experience is our ultimate goal, we will continue to balance the level of our investment with our overall financial objectives, confident that the progress we are making will ultimately be reflected in our customer metrics and financial metrics.

And with that, I will now turn the call over to our Chief Financial Officer, Gregg Seibert.

Gregg G. Seibert

So thank you, Jim, and good morning. We added approximately 1,000 high-speed data customers and 3,000 voice customers in the second quarter of 2013.

Our video subscribers and total customer relationships declined by 20,000 and 11,000, respectively.

Average revenue per video subscriber was $162.42 in the second quarter and increased $5.49 as compared with the prior year period. This increase was principally related to our recent price initiatives.

Average revenue per customer relationship was $144.74 in the second quarter.

As compared with the prior year, cable revenue for the quarter increased by approximately 1%. This increase principally reflects the impact of our price initiatives, as well as more data and voice customers than on the second quarter of 2012.

This increases were partially offset by fewer video customers, lower pay-per-view and VOD revenue and lower advertising revenue versus the prior year period.

Cable advertising revenue declined by 9% year-over-year. Decline is due principally to lower spending by pay-TV services and the automotive sector.

Cable AOCF declined 11.3% in the second quarter as compared with the prior year period, primarily reflecting a 9% increase in programming costs and a 7% increase on all other operating expenses.

The programming increase reflects a $7 million reduction in affiliate fees related to the resolution of a contractual matter.

The increase in operating expenses reflects higher employee costs, including a full quarter's impact of our 2012 non-executive compensation initiative and higher legal fees.

Cable AOCF increased by 19% sequentially. Cable second quarter AOCF margin was 32.1%, up from 27.9% during the first quarter of 2013. Cable capital spending in the second quarter was $223 million, a $19 million decrease from the same period in 2012. This decrease reflects lower spending related to our Multi-Room DVR infrastructure and higher spending on WiFi, among other changes.

Total capital expenditures for the first half of 2013 exceeded the amount for the comparable 2012 period, in part due to certain spending that was delayed from the fourth quarter of 2012 as a result of Superstorm Sandy.

Despite this, as Jim mentioned, we will continue to actively manage our capital spend and we are still forecasting total 2013 capital expenditures to be lower than the 2012 level.

At Lightpath, revenue increased 1.6% and AOCF increased by 3.8% over the prior year period.

Other revenue declined 1% and the AOCF deficit increased by 6.2%, principally reflecting a decline in advertising revenues at Newsday, which was partially offset by lower operating costs.

As Jim noted, total AOCF increased by 26% sequentially. Looking forward, we anticipate that total third quarter AOCF will not materially differ from our reported second quarter results.

In addition to our various operating initiatives, we continue to seek other ways to operate more efficiently. Our sale of Clearview Cinemas, the closing of both Newsday Westchester and OMGFast and the significant reduction in our annual investment in MSG Varsity are all examples of these efforts.

For instance, the sale of Clearview will have a positive impact on total company AOCF, as it contributed approximately $15 million of negative AOCF in 2012.

As we progress through the second half of 2013, we'll continue to seek ways to operate more efficiently.

Now turning to the company's financial position. The company's second quarter consolidated cash position was $450 million and net debt was $9 billion, excluding Bresnan.

We had $1.43 billion undrawn and available under the $1.5 billion revolving credit facility at CSC Holdings as of the end of the quarter.

Our second quarter consolidated cash position reflects the receipt of $175 million in cash related to the final allocation of the VOOM litigation settlement. Our total share of that settlement was $525 million.

However, our second quarter consolidated cash position does not reflect the $673 million of net proceeds that we received on July 1 from the sale of the Optimum West business. This amount is net of the repayment of debt and the payment of certain transaction expenses. The receipt of these cash proceeds will be reflected in our third quarter financial results.

Our debt outstanding at the end of the quarter reflects the refinancing of our principal senior secured credit facilities, which closed in April.

As discussed on our first quarter call, we continue to execute on our stated goal of extending debt maturities, increasing our financial flexibility and reducing our overall cost of capital by entering into a new $4.8 billion credit agreement to refinance our principal revolver and term loan facilities.

This transaction allowed us to take advantage of historically attractive interest rates and further extend our debt maturities.

In calculating our total company leverage ratio, AOCF is determined using the latest quarter annualized AOCF.

As a result, our leverage ratios may continue to be volatile, as they are more sensitive to changes in quarterly AOCF than they would be if our leverage was measured based on a trailing 12-month AOCF metric.

At June 30, the company's consolidated net leverage ratio was 5.2x. The CSC Holdings Restricted Group bank leverage ratio was 3.4x.

Pro forma for the receipt of the Bresnan net cash proceeds, the company's second quarter consolidated net leverage ratio was 4.8x as compared with 6.7x at the end of the first quarter of 2013.

We did not repurchase shares of Cablevision stock during the quarter. We have more than $450 million of remaining stock repurchase authorization, and we will continue to be opportunistic regarding additional repurchases as we work to return the business to overall AOCF growth.

As stated on a number of occasions, we remain focused on reducing our leverage. Last week, we announced that we will repay approximately $296 million of our outstanding CSC Holdings senior notes due in 2014 and 2015 with a portion of the Optimum West proceeds. The total repayment amount will include the payment of accrued interest and the related call and make whole premiums.

Now with that, operator, we'd now like to open the call for questions.

Question-and-Answer Session

Operator

[Operator Instructions] And your first question comes from Doug Mitchelson of Deutsche Bank.

Douglas D. Mitchelson - Deutsche Bank AG, Research Division

Question, just start -- for Jim, can you talk about the competitive environment? I'm trying to understand how much of the company subscriber performance is due to taking price increases this year versus competition with FiOS, since they reported a good quarter? So we're trying to figure out what the right piece of growth is looking forward.

James L. Dolan

I'm not sure I understand that question.

Douglas D. Mitchelson - Deutsche Bank AG, Research Division

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

Right.

Douglas D. Mitchelson - Deutsche Bank AG, Research Division

And yet FiOS, I think, probably continues to creep its build out, its 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 have 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

Well, FiOS is really not expanding their footprint. They -- we have seen no evidence of that other than a little completions of like 100 customers here and there, nothing else that is consequential at all. As far as the impact of the rate increase, this is a good one for Kristin to answer. If you're -- if she's there. Let's see if this will work. Kristin, are you there?

Kristin Aigner Dolan

I'm here. Yes, so on the rate increases, if you're talking specifically about the sports programming increase in Optimum Online 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 D. Mitchelson - Deutsche Bank AG, Research Division

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 Aigner Dolan

Yes, 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 8 to 12 months, and also on improving value perceptions of customers, particularly because we knew we had a lot of the advancements that Jim just spoke about coming down the pike. So those have definitely helped with retention and also it helps improve value perceptions, and we have research that shows that. So this month, it's actually 1 year since we relaunched the Optimum brand, and we think it's really working. And then 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 it. We're going to keep going, and we're really pleased with the work that's been coming out in response to it.

Douglas D. Mitchelson - Deutsche Bank AG, Research Division

Not to throw baseball analogies in there, but I mean, would -- could you give us a sense of what inning you think it is in terms of the marketing shifts you're doing?

Kristin Aigner Dolan

I'm not really a baseball fan. I like basketball and hockey a little more. But it's -- marketing is always evolving. It's an interesting marketplace with competition, but our focus is really on value perceptions, the integration of the products for customers, seeing how they all work together, promoting WiFi. So I'd say it's ever evolving as opposed to something with a definitive end.

James L. Dolan

That sounds like playoffs in -- overtime in the playoffs, just goes on forever.

Operator

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

Jessica Reif Cohen - BofA Merrill Lynch, Research Division

It's 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 in cable, a potential M&A in cable. I just wonder, does it involve Cablevision? How do you envision your company playing a role in this in either direction?

James L. Dolan

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 the -- 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, that the -- 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

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 in our sites. 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 - BofA Merrill Lynch, Research Division

And 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

I recall that question come in 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 further.

James L. Dolan

Well, I think we're -- we still very much believe in the Newsday asset. The -- 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 portion of Newsday as part of a benefit of the cable, their cable subscription. The business itself to me is in somewhat in transition. The -- but I think that there is at least a potential for a very bright future for that business.

Jessica Reif Cohen - BofA Merrill Lynch, Research Division

And I have just one last one, which is sort of along the lines of what Doug was just asking. But I'm going to be a little more specific, on your high-speed data subs, why were the net adds 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

Should we go back to Kristin on that? Let's go back to Kristin on that one.

Kristin Aigner Dolan

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 in moves in the marketplace. And I think on the other MSOs have talked about that as well.

Jessica Reif Cohen - BofA Merrill Lynch, Research Division

Are you seeing any benefits from housing yet? Or...

Kristin Aigner Dolan

We're seeing a lot of moves, but that's...

James L. Dolan

No. But -- in housing additions, we're not seeing that yet. And 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 - BofA Merrill Lynch, Research Division

You think you'll see it in Q3?

James L. Dolan

We're not used to making forward-looking statements.

Operator

Your next question comes from Marci Ryvicker of Wells Fargo.

Marci Ryvicker - Wells Fargo Securities, LLC, Research Division

Just I kind of think about how you view the business over time. And if I think about you have so many moving pieces right now, is it fair to say that maybe your normalized AOCF numbers over time, you can get back to maybe the $2 billion we saw at just stand-alone Cablevision before all of the investments you made? Or is there something structural that will cause you to be below that number?

Gregg G. Seibert

Marci, I think what -- one of the themes that you hear from us is the fact that we have invested in the business. We continue to invest in the business. Our job isn't done on that front, but we are fully committed to growing AOCF in this business. We're not going to provide specific guidance on it. We're not going to provide you with a specific timetable, but we are highly focused on growing AOCF at the company, getting our margins up and getting our leverage down.

Marci Ryvicker - Wells Fargo Securities, LLC, Research Division

And then just a clarification, for the share repurchase activity, is that completely just tied to your leverage ratio? Is there anything else that goes into the decision as to when you come back into market?

Gregg G. Seibert

There are a lot of things that go into the decision. I think I've talked in the past about what we call the hierarchy of capital allocation at the company. And obviously, the first step, just making sure that we have the capital necessary to invest in our business and deliver the best quality product to our customers. Second, we want to make sure that we have a balance sheet that sustains the business. We certainly feel that at today's leverage ratio, we're in a better place than we were last quarter, and we have a maturity schedule that I think is highly flexible in terms of our future balance sheet activities. The third has been the dividend. Despite a substantial decline in free cash flow from our peak, the board has made the decision to maintain the dividend. As you see, we declared it again this quarter, and we consider that to be a substantial return of capital to our shareholders. And so when you look at us, while we're highly liquid as a result of the Bresnan, the VOOM transaction, et cetera, we're just going to be very thoughtful in terms of how we allocate our capital going forward and we're going to continue to put the business first and foremost.

Operator

Your next question comes from Ben Swinburne of Morgan Stanley.

Benjamin Swinburne - Morgan Stanley, Research Division

As we look to third quarter, Gregg, you gave us some guidance on AOCF. Can you just remind us on the top line, the 2 pricing moves you've made. What the sequencing is from 2Q to 3Q? We got a full quarter of the sports and I don't know if we had a full quarter of broadband in Q2, just to make sure we've got our revenue trends correct.

Gregg G. Seibert

Well, in terms of the stated rate increases, the $5 rate increase on data went into place in January, sports surcharge was on April 1 indication. So you're seeing the primary impact of those 2 rate increases flow through the financials. I think as we look at the third quarter, we have a degree of seasonality in the business, certainly on the advertising side of the business and additionally, in terms of just the activity level in the business as a result of the many beach communities that we serve. So I think you should assume that the bulk of the pricing activity has already flowed through our income statement.

Benjamin Swinburne - Morgan Stanley, Research Division

Great. And I don't know -- I guess, a follow-up to Jim. On FiOS state, they brag a lot about the Quantum product. I think they said on their call, 1/3 of their FiOS data subs are on Quantum. Is that product initiative that they've put in had any impact on you guys? And do you think your speed upgrades now get you to a place, where from a price value perspective, you're really where you need to be or even maybe better than what they offer from a quality perspective?

James L. Dolan

I like the second part of that, the better part that the -- I do think that the speed increases are part of the overall value equation, and they are significant. And I think that we compare quite favorably to their products.

Operator

Your next question comes from Phil Cusick of JPMorgan.

Philip Cusick - JP Morgan Chase & Co, Research Division

One, I wanted to follow up on your comments around drawing down the debt. It seems like beyond roughly $300 million that you're taking down, there's not a lot of expensive places to put more money against the balance sheet. Do you think that leaves you a little more open to doing stock acquisitions? And second, I can't help but follow up on your clarification that you're out of the buy-side M&A game. And if you can talk a little bit more about thoughts on them, on potentially selling the business.

Gregg G. Seibert

I think Jim provided all the commentary we're going to provide on the possibility of selling the business. We're operating the business today. As far as the debt side, Phil, you've identified the fact that we've basically called the 2 relatively near-term maturities that have relatively high cost on them. At this point in time, we have moved to a very low interest cost structure. We have a decent amount of floating rate debt in that structure. And I think that you'll see future -- any future activity in terms of debt repayment, probably focused as much on the term loans as focused on our bond complex. We are still committed to whether reducing debt overall. And just because debts add a relatively low cost in today's environment doesn't mean that we might not want to reduce some of that debt.

Operator

Your next question comes from Craig Moffett of Moffett Research.

Craig Moffett - Moffett Research, LLC

Two questions, if I could. One, you mentioned that FiOS is not expanding its footprint. My understanding was that FiOS still has obligations with the New York City Public Service Commission to complete its build-out by 2016. So I'm wondering if you could just share your expectations for how much more FiOS you'll see in the New York City area? And then sort of dovetailing with that, can you just share with us your sort of, without giving specific guidance, what your long-term growth expectations are for the business? Is this a business that you think you can still materially growth beyond just price increases? Or is it increasingly going to be a price increase game to generate real revenue growth for the cable business?

James L. Dolan

I mean, I'll answer the second part of that while we put together the first part. So the way I see the business it's that the -- I do not see any products necessary on the horizon like we saw with the additions that made up Triple Play. I don't see that kind of growth. The -- but I do see the potential for the company to grow in its own footprint. But it needs to do the things that we're doing right now to become more efficient that the -- and to focusing on customer satisfaction. Connectivity is becoming more and more and more important to our subscribers that the video, of course, is still an important product. But connectivity, I think, is where customers are expecting to see the most performance out of their provider. And we're working hard on that. And as we do that, I do think that we will be able to monetize our execution and provide a level of growth, as I said, not like the level that we saw back when we were adding products, full-borne products into the marketplace, but more just based on customer satisfaction and our ability to deliver a really high-quality connected products.

Gregg G. Seibert

And Craig, to answer the first part of your question, again, Jim indicated what we're seeing on our footprint, which is very little from additional FiOS build. And in terms of their build-out obligations and the status with New York City, you'd really have to ask them. We don't have a view.

Operator

Your next question comes from Frank Louthan of Raymond James.

Frank G. Louthan - Raymond James & Associates, Inc., Research Division

Can you look at the -- look, talk just a little bit on the return on invested capital and the WiFi investment, and what sort of have been your response from the churn on that point? What sort of returns are you looking for? Or is that just more on the margin trying to reduce churn and get customers to stay with you longer?

James L. Dolan

The WiFi product for us is a product that differentiates us from all of our competitors. And as we continue to invest and as that differentiation becomes more and more prominent that the -- our WiFi customers now -- see, I have to check this with Kristin, but I think are using approximately 20 megabits of WiFi product a month that the -- significantly reducing the expense of their data bill on their mobile products. As we continue to invest in the product, that will become more and more prominent. That the -- in addition, the WiFi product itself is a superior experience to the cellular data products that are out there. So the combination of a superior experience along with the savings, we think, is -- gives us an advantage in the marketplace. And as we continue to invest in that advantage, as I said, we'll become more prominent.

Frank G. Louthan - Raymond James & Associates, Inc., Research Division

And what's the potential for turning that into more of a revenue source, the day licenses and so forth or relationships with other carriers?

James L. Dolan

That's sort of blue sky. At the moment, we're focusing in on our subscriber base and not looking to those other ancillary revenues, sources of revenue.

Operator

Your next question comes from Jason Bazinet of Citi.

Jason B. Bazinet - Citigroup Inc, Research Division

I just had a longer-term question, looking back actually a little bit. FiOS, I think, most investors would say has been reasonably successful where they've rolled out. When you look at your subscriber trends over the last several years, it's very hard really to see the discernible competitive impact from FiOS. And so I was just wondering if you could comment on what the underlying driver of that is. Have you taken share from satellite? Do you think FiOS has just been less effective in your footprint relative to what it -- how well it's doing outside the Cablevision footprint? Any color you can share would be great.

James L. Dolan

I think it's actually both of those that the -- you would point. We've seen satellite penetration reduced in the marketplace. And to be honest, I think our team does a very good job. And with the new initiatives that we put into place, I expect that we'll continue those trends.

Operator

Your next question comes from Vijay Jayant of International Strategy.

David Carl Joyce - ISI Group Inc., Research Division

This is David Joyce for Vijay. Your capital expenditures are still somewhat elevated capturing some growth opportunities. These are still part of the initiatives you started last year. Do you think you'll be finishing those up by the end of this year? And what would be involved in DOCSIS 3.1 upgrades in the future given that you've just lifted your broadband speeds again?

James L. Dolan

I'm not sure what that the -- I'm not sure I understand the question. Do you?

Gregg G. Seibert

Well, I think the question, from -- is my interpretation -- and David, I apologize, I'll interpret and you tell me if I'm wrong is that we announced a significant number of initiatives. We've concluded some of them, but we have many more to come, though.

James L. Dolan

And there's more than that. There's more to come in terms of being able to significantly impact customer satisfaction, which should result in better retention and, ultimately we hope, and growth in subscriber numbers. So as we look at those opportunities now, we'll be investing in them. That the -- I think that we're starting to significantly chip away at the ones that I would see as being service-related, improving our level of service with reductions in trouble calls, reductions in call volumes, et cetera, which is an indicator that the services is performing better than it did before in customers' homes. But I think there's still opportunity to provide even better service. And we'll look at those, continue to pursue those as long as they make monetary sense for the company.

Gregg G. Seibert

We're at the point where our budgeting process will start shortly. As Jim mentioned before, we're trying to dynamically manage our capital expenditures. We look at capital, but we're not prepared to starve the business. So don't expect us to get back to the levels that we were at several years ago in terms of percentage of revenue. In terms of the plant upgrades, I think what you're seeing with the high-speed rollout that we just did is that we feel that our plant is in very good condition. We have -- we're delivering over advertised speeds in every day part. We intend to keep the plant in that type of condition.

Operator

Your final question comes from Matthew Harrigan of Wunderlich Securities.

Matthew J. Harrigan - Wunderlich Securities Inc., Research Division

I think you touched on this a little bit already when you said you weren't talking with other carriers right now. But one of the things that's really interesting on the technology side, guys like Qualcomm are talking about these HetNets, where you're integrating WiFi and LTE. I mean, you got some huge advantages in your footprint with the WiFi you have already. These small cell approaches, it seemed like a good opportunity. And obviously, you'd be sticking your finger in the eye of Verizon as well. I assume that, that's something your engineers are looking at pretty actively. If it's not in your immediate road map, would you have any quick commentary on that potential?

James L. Dolan

Okay. I think we need to clarify the first thing. We did not say that we're not in discussions, we didn't say anything in regards to that. There was no comment on that.

Gregg G. Seibert

But I think the reference here is to WiFi. We've been asked the question as to whether or not we were discussing monetization of WiFi with other partners.

James L. Dolan

Yes. No, at this point, we're not looking at that. We're really looking at how it impacts our subscription and the value to that.

Gregg G. Seibert

And I think in terms of the mobile WiFi efforts that you're mentioning, obviously, we're looking at everything. But we have no announcements on the front that...

James L. Dolan

Operator, thank you.

Operator

Thank you. This does conclude today's conference call. You may now disconnect.

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