About a week after its planned $67 billion merger with Comcast unraveled, Time Warner Cable made a strong case for independence, adding 30,000 basic video customers in the first quarter, its first positive basic video quarter since 2009.
Revenue rose 3.5% and cash flow grew 1% in the period, fueled mainly by the subscriber metrics. In addition to the basic video growth, Time Warner Cable added 205,000 customer relationships (its best ever), 315,000 broadband customers (its best Q1 ever) and 320,000 telephony customers (its best ever).
"By almost any measure, Q1 was our best subscriber quarter ever," Time Warner Cable chairman and CEO Rob Marcus said in a statement. "We’ve made significant investments to improve our customers’ experience and our operational performance, and they are paying off. We are a far stronger company than we were just five short quarters ago.”
“Our company has terrific assets, a world class team and a well-architected operating plan; I am confident we can drive meaningful growth and create even more value for our shareholders,” Marcus continued.
Comcast had made its bid for Time Warner 14 months ago, after a string of bad quarters had made the second largest cable company in the country vulnerable to unsolicited advances. Charter Communications, which had pursued TWC for months before being trumped by Comcast, is expected to make another bid for the company soon. With this quarter's performance, the potential purchase price has likely risen for the New York-based operator.
According to a recent report on cable news channel CNBC, Charter CEO Tom Rutledge has reached out to Marcus and a meeting between the two next week is “highly likely. Time Warner Cable did not comment on the report.
In a note to clients, Elevation LLC media analyst Stephen Sweeney wrote that despite a slight revenue and cash flow growth miss, he was more impressed by the subscriber metrics.
“We think that the turnaround in subscriber growth is much more important at this point than margins or EBITDA,” Sweeney wrote. “The key right now for TWC is returning to consistent video and broadband subscriber growth, which management has already achieved over the past year with its own organic turnaround plan. We do not think the slight EBITDA miss is a major issue at this point, and we think that it actually supports the case that a deal with Charter would be in the best interests of shareholders given the expense synergies and accretive nature of a deal with Charter.”
Sweeney, however, believes Charter would have to bid at least $175 per share for Time Waner Cable, well above the $158 range of the terminated Comcast bid.