Cable Operators

Good Week for Time Warner, Parsons

2/03/2006 7:00 PM Eastern

Rogue investor Carl Icahn turned up the heat in his battle with Time Warner Inc. last week, enlisting longtime media executive Frank Biondi into his effort to unseat management and break up the company. But Time Warner chairman and CEO Richard Parsons obtained some additional ammunition for his side: better-than-expected financial results.

Icahn started off last week saying Biondi, who had been CEO of Universal Studios and Viacom Inc. in the 1980s and early 1990s, would become CEO of Time Warner if his proxy battle was successful. Biondi is currently senior managing director of private-equity firm WaterView Advisors.

Icahn also promised a long-awaited plan to reorganize Time Warner — written by ally and Lazard Ltd. chairman Bruce Wasserstein — would be released Feb. 7.

It would be Biondi’s role — if chosen by the board — to execute that plan, which according to a press release would involve a separation of Time Warner’s component businesses and a large share repurchase.

Parsons has avoided addressing Icahn’s efforts directly since the two met briefly back in August, when Icahn launched his attack. At the time, Icahn called for full divestiture of its cable operations (instead of the 16% spinoff anticipated after it acquires Adelphia Communications Corp.) and a $20 billion share-repurchase plan.

Parsons got off a zinger at Icahn’s expense last week, while continuing to avoid his name.

“No one can run these businesses better than current management,” Parsons said on a conference call last Tuesday, discussing Time Warner’s fourth-quarter results.

In the fourth quarter, the media giant delivered more than Wall Street expected. Overall revenue rose 7%, to $11.9 billion, and a measure of cash flow known as adjusted operating income before depreciation and amortization rose 18%, to $2.9 billion, partly because of strong results at the cable systems and cable programming networks.

Cable-system revenue rose 13%, to $2.5 billion, in the quarter and AOIBDA gained 11%, to $985 million.

The cable networks — including Turner Broadcasting System Inc. and Home Box Office Inc. — reported a 6% revenue gain, to $2.4 billion, and a 22% increase in AOIBDA, to $811 million.

At Time Warner Cable, basic subscribers increased by 34,000 customers, while digital customers rose by 199,000 (the largest fourth-quarter increase since 2002).

High-speed Internet subscribers rose by 265,000 subscribers (the largest fourth quarter increase in the segment since 2002) and digital phone customers increased by 246,000. At year-end, the cable company had 1.1 million telephony subscribers.

October