TWC Beats Q1 Estimates on All Metrics

High-Speed Data, Telephony Subs Rise, Video Losses Down

By Mike Farrell -- Multichannel News, 1/30/2012 12:01:00 AM

Time Warner Cable started the cable earnings season with a bang, beating analysts’ expectations on practically every financial metric in the fourth quarter and easing fears of continued video subscriber erosion by improving basic-customer losses.

Time Warner Cable lost about 129,000 basic-video customers in the period, an improvement over the 141,000 it lost in the same span in 2010. On a conference call with analysts, chief operating officer Rob Marcus said driving video improvement was a 3% rise in new customer connections, a direct result of increased marketing, customer acquisition, upsell and retention efforts — a program the company calls “Get, Grow and Keep.”

Those efforts are having an impact across all product lines — TWC added 117,000 high-speed data customers (vs. 89,000 in the prior year); and telephone subscribers, which had declined by 8,000 in the third quarter, returned to positive territory with the addition of 37,000 customers.

That momentum is expected to continue into this year with the addition of new products and the continued rollout of a home security service — Intelligent Home — and a joint marketing agreement with Verizon Wireless.

TWC introduced about two dozen new products in 2011 and expects the innovation engine to continue to hum in 2012. The Intelligent Home product is available in five cities and should expand throughout the year. In addition, TWC is building out Wi-Fi access in Los Angeles for its high-end broadband customers (and for noncustomers by selling Wi-Fi “day passes”). A joint marketing agreement with Verizon Wireless, part of the sale of the wireless spectrum owned through TWC’s SpectrumCo partnership with Comcast and Bright House Networks, will likely include bundling a wireless phone component with the TWC triple play initially, Marcus said.

The nation’s second-largest MSO also is making strides in customer service — most of its markets have two-hour service appointment windows, with some at one hour, and the company is experimenting with specific times for service calls in certain cities. Marcus said TWC is further automating the service process — the number of calls answered and completed by an automated attendant improved by 40% in 2011 and should expand another 30% this year, he said. More customers are resolving service problems online, and eff orts are afoot to enable more self-installation of services.

“The bottom line on customer service, we’re making progress,” Marcus said.

Chairman and CEO Glenn Britt added that the efforts show TWC is moving away from a one-size-fits-all philosophy and is gearing products and services more toward individual customer needs.

“That sounds like a lot; it is,” Britt said on the conference call. “The marketplace for residential services is dynamic, both in terms of customer expectations and the competitive environment. In addition, the audience is bifurcating — one group is extremely price conscious, perhaps due in part to the ongoing economic malaise; the other group is willing and able to pay more for more features and service. We’re going to focus more attention on products and services that best meet each group’s needs.”

So far, that focus is driving financial results as well. Revenue was up 4% in the quarter (beating analyst-consensus estimates of 3.5% growth), cash flow rose 8.7% (ahead of 5-6% consensus), and net income soared 44% in the period.

“What’s not to love?” said Sanford Bernstein cable and satellite analyst Craig Moffett in a research note.

TWC also made moves to give some of that good fortune back to investors — it announced a $4 billion share-repurchase plan (double the $2 billion analysts expected) and increased its quarterly dividend 17% to 56 cents per share.

That also helped drive up TWC shares — they rose 7.4% ($5.08 each) to $74.19 in early trading Jan. 26.