TWC Ambitions Go Beyond iPad

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Time Warner Cable reported strong
financial growth in its first-quarter report, and
CEO Glenn Britt unveiled coming updates to
the second-largest U.S. MSO’s controversial
iPad applications.

Time Warner Cable has taken some heat
for the iPad app — several programmers initially
objected to their channels being included
in the service, but later reached deals with
the cable operator.

Viacom has been the lone holdout, trading
barbs with the cable operator in federal court.
TWC has asked for a declaratory judgment allowing
it to stream the programmer’s networks
to Apple’s popular tablet device; Viacom has
countered with a claim of breach of contract.

Time Warner Cable chairman and CEO
Glenn Britt, speaking on a conference call with
analysts, seemed unconcerned. He added that
about 70 channels are currently available on
the app and by year-end, nearly all of the linear
channels on TWC’s cable lineup will be available
— including broadcast stations in select

Next month, the product will be updated to
include a remote-control function and the ability
for customers to remotely program their digital video


Britt added that the iPad app was just the tip of the iceberg,
noting that the underlying IP technology could be the basis
for many more new products and offerings.

“I want to emphasize that our iPad app is not a one-off
product,” Britt said. “Rather, we are investing in a development
process and a development team that will introduce
capabilities to customers in rapid succession.

“The consumer-electronics industry is embracing the
idea of devices such as Smart TVs with built-in intelligence
and two-way communication capability all built on IP
standards. The technology we’re using to simulcast video
to iPads will eventually feed all these devices. Over time,
this may lead to a world without set-tops, which could enable
a much better customer experience.”

While the iPad app has drawn the most attention, Time
Warner Cable continued to chug along on the operations
front, reporting steady growth. Revenue was up about 5%
in the period, to $4.8 billion, and adjusted operating income
before depreciation and amortization rose nearly
4%, to $1.7 billion. Fueling that rise was the addition
of about 189,000 high-speed data customers and 84,000
phone customers. Although subscriber growth was behind
that of last year mainly because of continued weakness
in the economy —TWC added 221,000 high-speed
data and 97,000 phone customers in the prior year — basic
video losses of 65,000 customers were far better than
the 141,000 lost in the fourth quarter. And they were
nearly spot-on with analysts’ consensus estimates of
about 60,000 basic video losses in the period.

The customers that are staying have proven to be
more profitable — free cash
flow was $927 million in the
quarter, up a strong 42% from
the previous year.

“This is consistent with what
we believe to be Time Warner
Cable’s strategy in 2011 — a focus
on driving revenue per customer
(ARPU) over maximizing
unit growth for the betterment
of underlying free cash flow,”
Morgan Stanley media analyst
Ben Swinburne wrote in a research


Chief operating officer Rob
Marcus said on a conference
call with analysts that video
subscriber trends are improving
— the MSO added customers
in March — and the losses
were mostly skewed toward
lower-end analog only subscribers.

Marcus also provided some
insight into two newer offerings
— its high-end Signature
Home service and its lower-end
TV Essentials package. Marcus said that so far, there are
about 10,000 Signature Home customers paying an average
of $210 per month. About 70% of Signature Home
customers are existing triple-play customers who have
upgraded, paying Time Warner Cable an additional $20
per month.

TV Essentials, which has only been launched in two
markets, is proving to be an effective targeted acquisition
and retention tool, although he did not release customer