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UPDATE 1-Cablevision's higher cable rates make up for subscriber losses

(Adds details, analyst comments, background, shares)

May 8 (Reuters) - Cablevision Systems Corp reported better-than-expected quarterly revenue as more advertising and higher cable subscription rates offset the impact of a fall in the number of video customers, sending its shares up as much as 7 percent.

The company, controlled by New York's Dolan family, said average monthly cable revenue per customer rose 6 percent to $148.22 in the first quarter ended March 31.

Revenue from cable advertising grew 16.8 percent.

Adjusted operating cash flow, Cablevision's most closely watched metric, rose 24.8 percent, while capital expenditure fell 20 percent.

"It looks like the business has stabilized. They have made their investment in shoring up their service profile and now the spending is coming down," Brean Capital analyst Todd Mitchell told Reuters.

He said the drop in capital expenditure was the "most positive dynamic" he saw in the results.

Cablevision, however, lost about 14,000 video subscribers, more than the 7,700 customers analysts were expecting, according to research firm StreetAccount.

The cable company has been losing subscribers as it has cut down on discounts and promotions to customers switching providers often for better deals.

Cablevision has the largest exposure to Verizon Communications Inc's pay TV service, which has been taking customers away from cable companies in recent years with aggressive pricing and promotions.

Cablevision posted a first-quarter net income of $89.8 million, or 33 cents per share, attributable to shareholders compared with a loss of $16.1 million, or 6 cents per share, a year earlier.

Revenue rose 4.3 percent to $1.58 billion, beating the average analyst estimate of $1.56 billion, according to Thomson Reuters I/B/E/S.

Cablevision's shares were up 2.6 percent at $16.99 in early trading on the New York Stock Exchange on Thursday.

(Additional reporting by Liana B. Baker in New York; Editing by Simon Jennings and Kirti Pandey)

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