Cablevision Systems Corp reported a fourth-quarter profit on Thursday as it added more Internet and phone subscribers than expected.

Shares of the New York area cable company rose nearly 4 percent as a reduction in debt and capital spending boosted annual free cash flow growth and cheered investors.

Cablevision reported a net profit of $78.4 million, or 27 cents a share, compared with a year-earlier loss of $323.2 million, or $1.11 a share.

Earnings from continuing operations were 26 cents per share. Wall Street analysts on average had expected 36 cents, according to Thomson Reuters I/B/E/S.

Revenue rose 5 percent to $2.15 billion. Analysts had forecast $2.10 billion.

Profit margins at the company's cable business expanded during the quarter.

Chief Operating Officer Tom Rutledge told Wall Street analysts on a conference call that the company expected margins to continue to expand with its current pace of growth.

Free cash flow from continuing operations grew 63 percent to $827.3 million in 2009, leading to expectations that Cablevision might use its growing cash reserves to pay a special dividend or announce a large buyback.

But Executive Vice President Gregg Seibert told analysts that such plans were currently not in the cards.

During the quarter, Cablevision lost 2,800 video customers as it faced stiffer competition from rivals like Verizon Communications Inc and satellite companies.

However, analysts were expecting the video business to lose more subscribers.

They have weathered the storm from Verizon's FiOS with remarkable success over the five years since Verizon's first incursion into Cablevision's business, said Bernstein Research Craig Moffett.

During the quarter, Cablevision added 45,700 Internet and 51,400 phone customers.

Miller Tabak analyst David Joyce had been expecting Cablevision to lose 3,000 video subscribers, but add just 26,000 Internet users and 26,000 phone subscribers.

Cablevision, which is controlled by the Dolan family, formally spun off its Madison Square Garden Inc unit earlier this month.

MSG is home to the venue of the same name as well as Radio City Music Hall, the New York Knicks basketball team and the New York Rangers hockey team.

Shares of Cablevision were up 3.7 percent at $23.68 in morning New York Stock Exchange trading.

(Reporting by Yinka Adegoke, editing by Gerald E. McCormick and Lisa Von Ahn)