The cable earnings season came to a close this week with Time Warner Cable sending a cautious message to the investment community.
TWC, the second-largest cable operator in the country, with about 13.3 million subscribers, reported strong third-quarter results: basic-subscriber losses were less than expected at about 31,000, and the company added 124,000 digital-cable subscribers, 214,000 high-speed-data customers and 200,000 digital-phone customers in the period.
But revenue and cash-flow growth — at 8% and 9%, respectively — just missed TWC's own aggressive targets: to meet its full-year estimate of 9%-11% cash-flow growth, it needed to report a 10% or greater increase for the quarter. As a result, the media giant lowered its full-year guidance to 8% growth in both metrics.
On a conference call with analysts last Monday, CEO Glenn Britt said the company was pleased with its third-quarter results, but he cautioned investors that the fourth quarter could be a doozy.
“If people continue to lose their homes and jobs, it would be naive to assume that there would be no impact on our business,” he said. He added that the cable operator is seeing a “significant slowdown” in subscriber growth, particularly for video and voice services, going into the fourth quarter and that customers are pulling back on buying advanced services like pay-per-view and digital video recorders.
TWC seemed to be the only MSO so far to acknowledge a noticeable downturn because of the economy.
Cablevision Systems, which reported its third-quarter results on Nov. 6, said there has been no change in non-pay churn so far. At Charter Communications, which also reported third-quarter earnings Nov. 6, CEO Neil Smit told analysts the economy has had a minimal impact on its operations.
The numbers appeared to prove that out. Cablevision lost about 19,000 basic subscribers, but its cable-revenue and cash-flow growth — 10% and 13.6%, respectively — continued to be among the strongest in the industry. The Bethpage, N.Y., MSO added 25,000 digital-cable customers (digital penetration is now 90.4%, tops in the industry), 32,000 high-speed-data customers and 58,000 telephony customers. That was a little below some analysts' estimates but, given the competitive landscape, a strong performance.
Cablevision has the greatest exposure of any cable operator to Verizon Communications FiOS TV product. But in a research note, Sanford Bernstein cable and satellite analyst Craig Moffett said the third-quarter results show that even after three years of competition, “there is still no visible evidence of FiOS in Cablevision’s numbers.”
Other MSOs reported equally strong results. Charter lost about 26,000 basic customers in the quarter, and revenue and cash-flow growth were a healthy 8% and 11%, respectively.
Mediacom Communications, which reported earnings on Nov. 6, gained 3,000 basic subscribers in the period, its second consecutive period of basic growth.