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No. 2 US MSO reports lowest quarterly video sub losses and highest broadband sub gains in years in first-quarter earnings.

TWC Cuts Video Losses, Boosts Data Gains

Alan Breznick
4/24/2014
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Even if it's just playing for pride right now, Time Warner Cable appears to have raised its game to a new level.

In its most upbeat earnings presentation in some time, Time Warner Cable Inc. (NYSE: TWC) reported notably lower video subscriber losses and higher broadband and voice subscriber gains in the first quarter as the company began prepping for its pending buyout by Comcast Corp. (Nasdaq: CMCSA, CMCSK). TWC also started adding customer relationships again and substantially reduced its customer churn rate after suffering heavy subscriber losses across the board in the second half of last year. (See Comcast to Buy Time Warner Cable for $45.2B and TWC: Charter's Got Nothing on Us.)

Trying to put a positive spin on the continuing erosion of its pay-TV subscriber base, TW Cable said it lost "only" 34,000 video subscribers in the winter quarter, a big improvement over the 119,000 video customers that it lost in the same period a year ago and its lowest quarterly loss in five years. As a result, its total video sub base now stands at nearly 11.2 million.

In fact, TWC Chairman & CEO Rob Marcus said, the first quarter loss "was as good as we've seen in some time." TWC Cable CFO Artie Minson noted that the company's video subscriber performance improved month-by-month during the quarter, ending the period with an actual subscriber gain in March.

Despite the improved video performance, though, TWC's video revenues continued to slide in the quarter. Video revenues dropped to $2.5 billion, down 6.6% from nearly $2.7 billion a year earlier. Due to this drag and a smaller decline in voice revenues, the company's total residential services revenues slid 0.9% to just under $4.6 billion despite a healthy increase in broadband revenues.

On the broadband side, TW Cable enjoyed a truly standout quarter, signing up 269,000 high-speed data customers as it aggressively pursued DSL users. That's more than double the 131,000 broadband subs that it added a year ago and its best quarterly performance in that category in six years.

As a result, TW Cable now has close to 11.4 million broadband subscribers. That makes it the second major US MSO to have more broadband than video subs, joining would-be suitor Charter Communications Inc.

TW Cable also showed marked improvement on the voice front, netting 107,000 new phone subs. The gain, reversing a loss of 35,000 phone customers a year ago, was its best quarterly showing in the voice area in two years. The company ended the quarter with 4.9 million voice customers.

Thanks to these improved subscriber metrics, TW Cable boasted that it added 128,000 total customer relationships in the first quarter, the most it has added in more than seven years, boosting its total beyond 14.5 million. The company also signed up more double-play and triple-play customers, after shedding bundled subscribers in the second half of 2013.

TW Cable executives attributed the lion's share of the gains to reduced customer churn, after bumping up their marketing budget for subscriber retention efforts for the quarter. TWC COO Dinni Jain said the retention gains should be "sustainable" throughout the year even as the company institutes its annual rate increase this spring.

In response to an analyst question about the relatively weak performance of Verizon Communications Inc. (NYSE: VZ)'s rival FiOS service during the quarter, Marcus noted that his company saw its "most significant" churn reduction in markets where it competes with FiOS, such as New York. "That's something we're proud of," he said.

Calling it the company's "best subscriber performance in the last five years," Marcus credited his management team. "We have not taken our eyes off the ball" since the Comcast acquisition was announced two months ago, he said. Minson added that the stronger performance has continued through April so far.

— Alan Breznick, Cable/Video Practice Leader, Light Reading

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Mitch Wagner
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Mitch Wagner,
User Rank: Lightning
4/28/2014 | 12:09:33 PM
Re: Video to broadband
SachinEE - Of course it's a different game entirely if TWC is acquired by Comcast, which seems likely. 
SachinEE
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SachinEE,
User Rank: Light Sabre
4/28/2014 | 10:35:22 AM
Re: Video to broadband
According to the latest statistics by TWC, broadband subscribers are overwhelming video subscriber as time goes by. This is so despite the positive adjustments in video performance. The recent 11.4 million broad band subscribers at the TWC cable, who have earned the company a position as the second major US MSO, should help rejuvenate its efforts inclined more on the broadband side than on the video side. It is very clear where much of the revenues are. It will be interesting to see what happens when this transition hits the peek. 
Mitch Wagner
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Mitch Wagner,
User Rank: Lightning
4/24/2014 | 6:14:36 PM
Video to broadband
Looks like the world is moving from video to broadband. It'll be interesting to see when that hits its tipping point, if it has not done so already. 
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