Basic Losses Continue At Time Warner Cable

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The basic-subscriber losses continued to mount Time Warner Cable in the third quarter, falling by 83,000 customers, mainly in its systems in Los Angeles and Dallas acquired by its parent Time Warner in last year via its joint purchase of Adelphia Communications with Comcast.

It was the second consecutive quarter of basic customer losses for Time Warner Cable – it lost 57,000 in the second quarter. And like the previous period, the bulk of the losses – 66,000 customers – came in Los Angeles and Dallas.

The operator has struggled with integration issues in Los Angeles and Dallas, but officials said on a conference call with analysts that most of those difficulties have been cleared up.

While investors may focus on the basic-subscriber losses, TWC stressed the gains that the company has made in other areas. In the third quarter it added 220,000 triple play voice, video and data subscribers, its best quarter ever.

On a conference call with analysts Wednesday morning, TWC CEO Glenn Britt said that there are three takeaways from the third-quarter results: financial results continue to be strong; the company added a substantial number of revenue generating units (522,000) and triple play customers in the period; and the company is making progress in Los Angeles and Dallas.

Operating income before depreciation and amortization (OIBDA, a measure of cash flow) was up 12% in the quarter to $1.4 billion and revenue rose 7% to $4 billion. OIBDA margins, even those at the acquired systems, are on the rise, Britt added. He said that margins rose 150 basis points overall and that about half of the acquired systems – excluding Los Angeles and Dallas – are already reporting margins in line with TWC’s legacy systems.

That margin growth appears to be fueled by gains in its telephony product. TWC added 275,000 digital phone customers in the quarter – 119,000 in the acquired systems.

On the conference call, TWC chief operating officer Landel Hobbs said that telephony is available in about 80% to 90% of homes in the Dallas and Los Angeles markets. As that product gains steam, TWC expects subscriber trends should improve.

“Our strategy in LA and Dallas is working,” Hobbs said. “As we have stabilized operations and launched advanced services in a meaningful way, we are beginning to see improvement in the operating metrics of these two divisions.”

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