Time Warner Inc. continued to make a strong case for the planned spinoff of its cable operations, as the media giant’s MSO reported better-than-expected subscriber growth across the board in the first quarter.
Time Warner Cable is expected to be spun off next year as a separate publicly traded company after its pending acquisition of Adelphia Communications Corp. is completed. Time Warner and Comcast Corp. jointly bid $17.6 billion for the Adelphia subscribers, with Time Warner getting a combination of about 3.5 million customers from both Adelphia and Comcast.
In the first quarter, Time Warner Cable added about 26,000 basic customers, 103,000 digital subscribers and 209,000 high-speed data customers (its first quarter of 200,000-plus additions in two years).
Its voice-over-Internet protocol service also continued to perform well, adding 152,000 subscribers, or about 15,000 per week. Time Warner Cable ended the period with 372,000 voice customers and said it is well on track to achieving its goal of 500,000 telephone customers by the end of the year.
In a conference call with reporters, Time Warner Media & Communications Group chairman Don Logan said that the telephone additions are expected to ramp up even more during the second quarter.
“I expect the 15,000 [additions] will creep up on a weekly basis,” Logan said. “I don’t know where it will end up, but we expect to have strong adds for the balance of the year.”
However, Logan did not expect the basic-subscriber trend to continue, adding that basic customers should decline in the seasonally tough second quarter and remain flat for the year.
Overall, Time Warner reported 3% revenue growth and 6% adjusted operating income before depreciation and amortization. At the cable systems, revenue and AOIBDA were each up 10%.
At the networks, revenue rose 4% and AOIBDA was up 6%. On the conference call, Time Warner Entertainment & Networks Group chairman Jeff Bewkes said that strong ratings at its cable networks — especially Turner Network Television, Turner Broadcasting System and Cartoon Network up double digits in all key demos — will make for a strong upfront.
“All of our networks are doing very well,” Bewkes said. “Probably as a result of all this, we’ll probably lead the marketplace negotiations and have very strong revenue growth for the entertainment division in the upfront.”
Bewkes also expected strong upfront performance at Time Warner’s news networks, adding that Cable News Network should better the 10% to 11% growth expected from its peers.
“The reason we think CNN will outperform that is because broadcast evening-news operations are turning over their anchors and we think that is diminishing ratings and advertiser commitments,” Bewkes said. “And news viewing is continuing to shift from broadcast over to cable.”
Time Warner shares were up 38 cents each to $17.06 per share in early trading Wednesday.