Networks post 20% Q1 gains.

Viacom Inc. on Tuesday (April 19) said a split-off of its fast-growing cable networks and film studio from its broadcast networks could come as early as the 2006 first quarter, as its quarterly operating profit rose on growth in cable networks MTV and Nickelodeon.

Viacom, which owns the CBS television network and Paramount Pictures movie studio, has been mulling a split off the cable networks and film studio from its more mature, but cash generative broadcast networks to boost its stock value.

In the first quarter, Viacom's cable networks posted a 20% rise in revenue and operating profit. The television division, including the CBS network and broadcast stations, had a 5% drop in revenue and 8% drop in operating profit.

On Tuesday, Sumner Redstone, Viacom's chairman/CEO said he was "personally committed to achieving the separation," but a thorough analysis had not concluded.

He expects a decision to be reached in the second quarter. Shares of Viacom rose 2.8%.

Viacom posted a first-quarter operating profit of $585 million, or 36 cents a share, up from $508 million, or 29 cents a share, a year ago.

Revenue rose 5% to $5.6 billion.

Wall Street expected first-quarter profit of 31 cents and revenue of $5.38 billion, according to Reuters Estimate.

Including a tax benefit and earnings from discontinued operations, Viacom in the year-ago quarter earned $710.5 million, or 41 cents a share.

Television results, including CBS and broadcast stations, were hurt by the lack of Super Bowl and political ad spending in the first quarter.

"Overall, it was a solid quarter," said Jeffrey Bray, managing director of Babson Capital Management, which owns Viacom shares. "Cable networks were very strong and radio was up, which it hasn't been in a year."

Although operating income at the Infinity Broadcasting radio division fell 5 percent on higher programming expenses, analysts said ad growth in radio was a welcome early sign of recovery. Radio revenue rose by 2%.

A Viacom split-off would be designed to address the divergent economics of its businesses that it believes attracts different types of investors. The move has been viewed as a tacit admission that the merger of CBS and Viacom has fallen short of its promise of better results through owning myriad media assets.

But after an initial investor euphoria over the prospect of improving the market valuation for Viacom's properties, media industry veterans said they saw little value in breaking apart the company.

Critics said a if the company were broken apart, Viacom would no longer be able to threaten to withhold the CBS broadcast station signal, or retransmission consent, as a negotiating ploy in convincing cable and satellite operators to broadcast new cable channels.

But Tom Freston, co-COO of Viacom, who oversees the programming divisions, said retransmission consent, which helped make the MTV channel a household name, was no longer an issue.

"We think that game is largely over," Freston told analysts. "Most of our deals are done till the end of the decade and cable operators will be focusing more and more on VOD (video on demand) and broadband."

Freston also said Viacom was leaning heavily on new digital services over wireless networks and high speed Internet connections for future growth. The company currently generates about $100 million in digital entertainment revenue, he said.

The company also in the first quarter bought back 39.1 million shares of its stock, worth $1.4 billion under a previously announced $8 billion buyback plan.

Looking ahead, Viacom said it was "on track" to deliver mid single-digit percentage growth in revenue and operating income, and high single-digit percentage growth in earnings per share for the full year 2005.