Hobbs: More Time Warner Cable Subscriber Losses Expected
COO Landel Hobbs Says ‘Seasonality’ Bleeds Into Third Quarter
By Mike Farrell -- Multichannel News, 9/17/2007 10:29:00 AM
Time Warner Cable chief operating officer Landel Hobbs tried to put a good face on the country’s second largest cable operator’s growth prospects, but warned that second quarter “seasonality” is bleeding into the third quarter, a fact that caused at least one cable analyst some concern.
Hobbs, speaking at the Merrill Lynch Media and Entertainment conference in Marina Del Ray, Calif., said that Time Warner Cable is making progress in integrating systems it acquired as part of the $17.6 billion joint purchase of Adelphia Communications with Comcast last year. But he said that seasonality, normally a second quarter phenomenon associated with snowbirds and college students disconnecting service as they leave for summer residence, bleeds into the first weeks of the third quarter as well.
Time Warner Cable lost about 57,000 basic subscribers in the second quarter, mainly in the former Adelphia systems.
“We’ve seen those trends continue into the third quarter,” Hobbs said at the conference. “Just now in the last couple of weeks we’ve seen seasonality exiting the business.”
That forced Pali Research media analyst Richard Greenfield, who has been critical of Time Warner Cable and its parent Time Warner Inc. in the past, to fire off a research note to clients that was doubtful that the cable giant will be able to turn things around in the coming quarter.
“[Third quarter] seasonality is new to us and even harder to digest when one considers that last year’s [third quarter] was burdened by taking on Adelphia systems one month into the quarter, when there were few quick fixes that TWC could implement,” Greenfield said in the research note.
Greenfield added that he now expects TWC to report subscriber losses “easily” in the 10,000-plus basic subscriber range, instead of the 15,000 additions he had previously predicted for the third quarter.
“The only conclusion we can really draw is that TWC is having a more difficult time integrating Adelphia/Comcast systems than it envisioned,” Greenfield wrote.
Hobbs said at the conference that progress is being made with the former Adelphia systems, but added that they were in dire need of repair. He added that while there is tremendous upside at the properties for new service additions – TWC just launched its triple play package of voice, video and data in Los Angeles in August – the company has had to “methodically correct” these systems.
For example, Hobbs said the Dallas system – obtained from Comcast as part of the Adelphia deal – had to be almost completely rebuilt. Hobbs estimated that TWC has completed rebuilt about 75% of the 275,000 passings in Dallas and will finish the job by the end of the year.
Hobbs added that commercial phone service – currently in 11 cities – will be rolled out by the end of this year, but not marketed until 2008. He also said that interactive advertising could become a TWC product in 2009 and beyond.
Time Warner Cable stock closed at $34.12 on Monday, down 62 cents each.
