Time Warner Cable Reports Stronger 4Q Results

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Time Warner Cable reported basic subscriber losses of about 50,000 customers in the fourth quarter, beating most analysts’ estimates and giving some hope that the second largest cable operator in the country is on track to reversing past customer erosion trends.

Time Warner Cable reported revenue of $4.1 billion a 7% increase and cash flow came in at $1.6 billion a 13% increase.

“Under normal circumstances, an ‘in-line’ quarter isn't newsworthy,” wrote Sanford Bernstein cable and satellite analyst Craig Moffett in a research note. “But in the wake of a relentless sell-off in cable stocks over the past three months, the fact that Time Warner Cable has managed to hit essentially all of its quarterly and annual marks must be judged a positive.”

The company added 168,000 digital subscribers in the quarter and high-speed Internet additions were 214,000. Time Warner cable also added 285,000 Digital Phone customers in the quarter, the largest single-quarter growth in its history.

On a conference call with analysts, Time Warner Cable CEO Glenn Britt said that while the integration of former Adelphia and Comcast systems – particularly in Los Angeles and Dallas – has been challenging, the most disruptive stage of the integration is behind the company. In the fourth quarter, the Los Angeles division led the company in net additions for high-speed Internet, phone and the triple play bundle. And the L.A. and Dallas markets combined reduced their basic subscriber losses by 69% in the period.

“We expect all of the acquired systems to contribute to our growth in 2008,” Britt said.

Britt also outlined Time Warner Cable’s outlook for 2008, with revenue growth expected to be about 9% and cash flow growth in the 9% to 11% range. He added that the drivers for future growth will be commercial telephony, HDTV service and enhanced products such as its Start Over offering.

Britt conceded that Time Warner Cable has not excelled in marketing its advantages over satellite TV and telco TV services, but stressed that will change in 2008.

“We will be marketing more aggressively in 2008,” Britt said. “We need to better communicate our advantage.”

Britt added that commercial services – mainly high-speed Internet and video services – generated about $660 million in revenue in 2007. With the rollout of commercial telephony to small and medium-sized businesses expected to be completed in most of its markets by the end of the year, Britt estimated that commercial services could grow at a rate of at least twice that of residential services in 2008.

On the HD front, chief operating officer Landel Hobbs said that Time Warner Cable already is outpacing its competition, adding that the operator offers 53 HD channels and 23 regional sports networks in HD currently. The operator has deals pending for another 20 HD channels this year. The company also plans to expand its HD pay-per-view movie offerings during this year from 50 to more than 200.

“Satellite can’t match this offer,” Hobbs said.

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