Cable Fuels Time Warner’s 4Q


Time Warner Inc. reported strong fourth-quarter results Wednesday, giving chairman and CEO Richard Parsons an opportunity to take a jab at one of the media giant’s most outspoken critics, investor Carl Icahn.

For the quarter, revenue climbed 7% to $11.9 billion and adjusted operating income before depreciation and amortization rose 18% to $2.9 billion. Driving that growth were its Time Warner Cable operations, which saw revenue rise 13% to $2.5 billion in the period and its AOIBDA increase 11% to $985 million, and its cable networks, which 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 while digital customers rose by 199,000 (the MSO’s largest fourth-quarter increase since 2002). High-speed-Internet subscribers rose by 265,000 (also the largest fourth-quarter increase in the segment since 2002), and digital-phone customers increased by 246,000, ending the year with 1.1 million telephony subscribers.

In a conference call with analysts to discuss fourth-quarter results, Parsons outlined his four top priorities for 2006: maintaining or improving the leading positions of each of its businesses in an increasingly competitive digital landscape; enhancing the competitive profile of its America Online Inc. unit; staying focused on completing the acquisition, along with Comcast Corp., of Adelphia Communications Corp.; and driving incremental returns to shareholders.

On the first point, Parsons alluded to changing technology that allows users to download content on various devices, ranging from home computers to devices like Apple Computer Inc. “iPods” and cellular phones -- all environments Time Warner has spent the past few years preparing to address.

“2006 is the year I expect all of our media businesses to allocate more resources and focus toward making our great content and brands even more relevant in a digital environment,” Parsons said.

Regarding enhancing AOL’s competitive position, Parsons referred to recent deals with broadband-service providers to migrate dial-up AOL subscribers to high-speed-Internet services and its recent advertising deals with Google Inc. ( Parsons added that Time Warner Cable and Comcast are expected to complete the acquisition of Adelphia by the end of the second quarter.

Parsons also pointed to Time Warner’s $12.5 billion share-repurchase plan as a means to return value to shareholders, adding that the company expects to double the pace of its share repurchases in the next three months, given the low price of its stock.

On the call, Parsons said Time Warner has already bought back about $3 billion of its stock since announcing the plan, averaging about $700 million of buybacks each month.

Parsons also managed to take a jab at Icahn, who has criticized Time Warner management and who launched a proxy fight in August to oust its top executives and break up the company.

Parsons said no one could run Time Warner’s businesses better than current management and while the company always looks at alternatives to increase shareholder value, it “cannot and will not experiment with the flavor of the day in the mere hope that it might work or simply because we are impatient with the market’s pacing in recognizing the intrinsic value of our related businesses.”

Time Warner stock was up 44 cents each to $17.97 per share in early trading Wednesday.