Marcus: Time Warner Cable Could Lose Subs in Q3


Time Warner Cable chief financial officer Rob Marcus told an audience at an industry conference Wednesday that the second largest cable operator in the country is on track to lose customers in the third quarter, a reflection of the stagnant economy.

As a result, Time Warner Cable stock fell nearly 5% ($2.47 each) on Wednesday, closing at $52.43 per share.

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Speaking at the Bank of America Merrill Lynch  Media, Communications & Entertainment conference in Newport Beach, Calif., Marcus said that Primary Service Units (or PSUs, a measure of voice, video and data customers) will likely fall below last year's third quarter levels.
Marcus said that continued high unemployment, high home vacancy rates and anemic new home formation are all having an impact.
"Video in particularly has been challenged," Marcus said. "Video net losses are pacing ahead of where they were in last year's Q3, voice growth is slower than it was last year and HSD [high-speed data] while the strongest performer, is still lower than last year. The net-net of all of that is that we may actually see a PSU loss for Q3."
Marcus did not estimate how big a video loss Time Warner Cable is bracing for, but the company lost about 84,000 video customers in the third quarter of 2009. PSUs in the year -ago period were up by 109,000, according to company financial statements.
On the bright side, Marcus said that financial performance won't be affected - Time Warner Cable still anticipates adjusted Operating Income Before Depreciation and Amortization (OIBDA) less capital expenditures to rise around 20% for the year.
While residential video service growth is expected to be weak across the board, Marcus said that commercial services is expected to grow more than 20% in 2010. Despite some efforts by incumbent phone companies to cut their pricing by as much as 40% to counter Time Warner Cable's commercial offerings, Marcus said he felt comfortable with the cable company's position.
Marcus added that Time Warner Cable launched its first segmented bundle product - a high-end premium package for its biggest spending customers - complete with a "white-glove" customer service offering in Charlotte, N.C. recently. He added that it would be the first of several segmented packages the company will roll out during the year.
Marcus also addressed indirectly some speculation that Time Warner Cable is on the acquisition hunt - a Reuters report earlier this week claimed Time Warner Cable was in early talks with Cox Communications regarding system swaps and possibly a broader alliance. Marcus did not directly respond to the Cox speculation - and he wasn't directly asked - but said that right now, there are no deals on the horizon.
"There is really nothing out there in particular that I see on the horizon," Marcus said. "But, we look at almost everything."