Time Warner Cable trotted out a handful of executives at its first Investor Day meeting with analysts in New York Wednesday, offering some additional insight into its integration plans for Adelphia Communications Corp.
This was the third time the MSO has held an investor day. The first was in 2001, shortly after Time Warner Inc. completed its merger with America Online Inc., and the second was in 2002 to unveil its new plans for the AOL online service -- the first devoted exclusively to Time Warner Cable.
The timing is crucial -- Time Warner plans to spin off Time Warner Cable as a separate publicly traded entity after the Adelphia transaction closes, expected by July 31. With a new pure-play cable currency, courting Wall Street analysts is essential.
While a handful of executives made presentations -- president and CEO Glenn Britt, chief operating officer Landel Hobbs, chief financial officer John Martin and executive vice president of product management Peter Stern -- touting Time Warner Cable’s strong financial performance and focus on innovation, one of the more interesting ones was made by Los Angeles region executive VP Roger Keating.
Time Warner Cable already has about 350,000 subscribers in the Los Angeles market. With the addition of 1 million subscribers in Los Angeles from Adelphia and another 750,000 from Comcast, it will control about 75% of the Los Angeles footprint with 2 million customers. Charter Communications Inc. and Cox Communications Inc. control the other 25%.
Keating said that by consolidating the once-fragmented Los Angeles market, Time Warner Cable will be able to sell more services like telephone and high-speed data, as well as consolidating advertising sales in Los Angeles.
Los Angeles has the highest direct-broadcast satellite penetration in the country at 28% (versus the national average of 23%) and one of the highest digital-subscriber-line penetration rates in the nation at 30%. Keating said that for every two cable-modem customers in Los Angeles, there are three DSL customers.
And voice-over-Internet-protocol telephony is virtually nonexistent -- while Time Warner does have some VoIP customers in the market, Adelphia and Comcast have not yet rolled out the service there.
That, Keating added, presents a huge opportunity for the company.
Aside from the ability to expand its digital-phone offering in the market, Keating said there are also opportunities to recapture video customers, particularly by offering ethnic channels and tiers.
“One-third of the homes in L.A. are Hispanic and about one-half of them are Spanish-dominant,” Keating said. “We plan to have the most robust Spanish-language offering -- more linear channels and a lot of on-demand Spanish-language content. Satellite won’t have that. We also see the opportunity to go back to many of the customers who left cable over the intervening years in the acquired footprint. We think we can win many of them back.”
Keating pointed to the success Time Warner Cable has already had in the market -- it has had three straight years of video-subscriber growth, and it added 35,000 digital-phone customers in its first full year of deployment. The Los Angeles operation had 13% revenue growth and 10% cash-flow growth in 2005, he added.
Keating added that the integration of Los Angeles will occur in four phases, the first of which will involve rebranding the systems under the Time Warner Cable name.
Phases two and three will occur over seven or eight months -- gradually moving the Time Warner product slate onto the acquired systems and building the Time Warner brand through a series of advertising campaigns that stress the cable operator’s innovation, customer care and local presence.
Phase four will entail using the mass media to drive the triple play and acquire new customers.
Keating said that in order to serve the Los Angeles market -- which has 23 truck centers, 63 cable stores and 120 franchise areas -- Time Warner Cable’s goal is to keep management as close to the customer as possible. To that end, the region will be split into three separate operating divisions, all with their own president and management teams.
The MSO announced those three division in November -- North (Ventura County and northwest Los Angeles County), Metro (city of Los Angeles) and South (Orange, western San Bernardino and Riverside counties).
Former Rochester division president Jeffrey Hirsch will head up the Metro division, former southern Los Angeles VP and general manager Fred Stefany will head up the South division and current Comcast senior VP for southern California Debi Picciolo will head up the North region.
All of the appointments are subject to the successful close of the Adelphia deal.