Light Reading

TW Cable Hemorrhages Subs

Alan Breznick
11/1/2013
50%
50%

Time Warner Cable is not exactly giving Glenn Britt, its retiring chairman and CEO, a great send-off.

Time Warner Cable Inc. (NYSE: TWC) reported huge customer losses for the third quarter, shedding residential video, high-speed data, and voice subscribers across the board. Specifically, the second-largest US MSO lost a whopping 306,000 basic video, 24,000 broadband, and 128,000 phone customers, racking up probably its worst quarterly performance ever.

TW Cable also shed double-play and triple-play subscribers, making the earnings report an overall rout for the company. Total customer relationships fell by either 117,000 or 131,000, depending on the two different types of metric the company uses.

In their earnings call with analysts Thursday morning, TW Cable executives blamed the unprecedented subscriber losses mainly on their twin programming disputes with CBS Corp. (NYSE: CBS) and Journal Broadcast Group over retransmission-consent fees. Both heated summer battles resulted in lengthy programming blackouts for cable customers in August and early September.

"All the action occurred in August and September, when the disputes were going on," said TW Cable COO Rob Marcus, who will take place Britt's place on Jan. 1. He noted that the programming disputes also had a lingering "hangover effect" on the rest of the MSO's operations, leading it to lose the broadband and voice users and reach out to fewer prospective subscribers as its customer call centers were jammed with complaints from angry customers.

Despite the unexpectedly high customer losses in Q3, TW Cable executives insisted that they made the right call in battling CBS for a month. They argued that they ended up paying notably less than they would have paid for the rights to CBS's local stations in New York, Los Angeles, and Dallas and Showtime Networks Inc. , the CBS cable property.

"In the end, the deal we reached was far better than when we started," Marcus said. Britt agreed, brushing aside the suggestion that he waged the war with CBS largely to push retransmission-consent reform in Washington, D.C. "We do think we are better off with CBS than we would have been if we didn't have this fight," he said.

Yet the breadth and depth of the quarterly customer losses stunned many financial analysts. Although they had been bracing for some negative impact on TW Cable's earnings from the bitter summer brawls with CBS and Journal Broadcast, they didn't expect the losses to be nearly this heavy.

In notes issued to investors, several analysts contended that the results would weaken TW Cable management’s ability to stave off an acquisition by Charter Communications and Liberty Global, which have been circling TWC for months. Not surprisingly, TW Cable stock shares climbed in early trading Thursday as speculation rose again about a deal.

"If Time Warner Cable wants to remain independent, this probably isn’t the best way to go about it," quipped Craig Moffett, principal and senior analyst of MoffettNathanson Research, in his note to clients. "The shareholder base at TWC is now more levered than ever to a takeover."

TW Cable officials, however, maintained their combative stance about any deals with Charter and Liberty Global. While pledging their dedication to creating and protecting shareholder value, they cautioned against merger fever.

"Consolidation can be a good thing," Britt said. "But the terms really matter." A long-time Time Warner official, he cited two large mergers in the company's history -- Time Inc.'s 1989 union with Warner Communications and Time Warner Inc. (NYSE: TWX)'s 2001 union with AOL Inc. (NYSE: AOL) -- as classic examples of "mergers of equals" that turned out to be heavily "lopsided" in favor of one party.

Even as the merger speculation inevitably heats up again, Marcus declared that he's determined to win back the residential customers that TW Cable lost over the summer and then some. On the earnings call with analysts, he outlined several steps that the MSO will take, starting as soon as early next month.

In one move, the MSO will shortly launch a holiday promotion where it will hand out Samsung tablets loaded with features to new customers. In another, the company plans to blitz the 4.5 million remaining telco DSL subscribers in its footprint with a new broadband-lite cable modem offering that will cost only about $15 a month.

"We’re going after DSL," Marcus said. "I'm challenging our team to convert at least half a million DSL subscribers over the next 18 months."

Further, Marcus said he has spent the last 90 days working with TWC senior management to develop a comprehensive program to "improve the customer experience" in select markets with the most customer service problems. Designating them "TWC Max Markets," he plans to focus the company's resources on cable customers in these regions, upgrading them to all-digital, putting in new HD and DVR set-tops, installing wireless DICSIS 3.0 gateways, boosting broadband speeds to new heights, and increasing network performance and reliability.

"The goal here is to fundamentally change the customer experience in a given market," he said. "So we're going to concentrate market-by-market."

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

(9)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View
albreznick
50%
50%
albreznick,
User Rank: Blogger
11/4/2013 | 8:57:57 PM
Re: Would love to see if the numbers say CBS feud was worth it
Good point. Yup, that number could have, and probably should have, been in my story. I'll do the math for you next time. Thanks for pointing that out.  
gconnery
50%
50%
gconnery,
User Rank: Light Sabre
11/4/2013 | 12:22:59 AM
Re: Would love to see if the numbers say CBS feud was worth it
Yeah, those numbers probably aren't going to be placed in public view anytime soon.


Makes me want to mention that I shouldn't have to Google TW Cable's recent quarterly numbers to figure out if their 306,000 video sub loss is significant or not.  Okay, so they 11.7 Million subscribers before, so 306,000 is 2.6%.  Yup that's a big number for a single quarter.


But seriously, why isn't this number in the story?  Its like those headlines screaming about the DJIA falling hundreds of points without mentioning that's at 15,000...
albreznick
50%
50%
albreznick,
User Rank: Blogger
11/3/2013 | 11:24:58 AM
Re: Capturing DSL subscribers.
Good points, David. I've wondered th same thing. Cable ops have generally not targeted DSL subs that aggressively. I think that's because they haven't wanted to compete on price too much. TW Cable now seems willing to do that. We'll see whether it proves worth their while.  
davidhoffman
50%
50%
davidhoffman,
User Rank: Light Beer
11/2/2013 | 11:59:36 AM
Capturing DSL subscribers.
I was wondering when a cable system operator was going to really go after the DSL customers in their territory.  With the removal of the analog channel requirement and the implementation of DOCSIS 3.0, the cable companies have additional tools to lower the cost of each Mbps delivered.  Any decently run cable operator should be able to equal the 6.0 Mbps or slower AT&T DSL services for half the price that AT&T charges. I am not talking about promotional pricing. They should be able to do that as a regular price with no bundling.
MarkC73
100%
0%
MarkC73,
User Rank: Light Sabre
11/2/2013 | 2:28:44 AM
Re: Would love to see if the numbers say CBS feud was worth it
Even if other providers might have benefited from TWC's battle with CBS, ask not whom the bell tolls for.  Negotiations can be rough, and content, I still believe will be king in the end, but even as competitor of TWC, I was hoping the precedence would end up in their favor.

I eventually lost track of the whole situation because it took so long, I guess I'll go google it now ...
albreznick
100%
0%
albreznick,
User Rank: Blogger
11/1/2013 | 4:20:16 PM
Re: Would love to see if the numbers say CBS feud was worth it
True, HSI is usually a big profit center for cable cos. So it's not typically used as a loss leader.

Yeah, picking up 500,000 DSL subs shouldn't be all that tough for TWC. When i heard Marcus talk yesterday, I thought he was going to set the figure at 1 million or more. Maybe he just wanted to name a target that he knew TWC could and would reach.

It's funny. Marcus seemed almost personally offended that there are still so many DSL subs in TWC's footprint. In fact, he called it "unacceptable," as if they were doing something morally wrong. He's going to be an interesting change from Glenn Britt, assuming he gets to run an indepoendent compny for long. 
pilchard
50%
50%
pilchard,
User Rank: Light Beer
11/1/2013 | 10:29:54 AM
Re: Would love to see if the numbers say CBS feud was worth it
HSI as a loss leader?  I thought this was where they were making the most money from residential subscribers these days....
Carol Wilson
100%
0%
Carol Wilson,
User Rank: Blogger
11/1/2013 | 10:11:32 AM
Re: Would love to see if the numbers say CBS feud was worth it
I agree with Karl -- how hard can it be to scoop up DSL subscribers in areas where the copper plant hasn't been improved? Unless TW Cable is convinced these folks will go wireless only? I wonder how much money they make on a $15 a month customer, unless the thinking is this becomes the loss leader for VoIP and basic cable. 

 
KBode
100%
0%
KBode,
User Rank: Light Sabre
11/1/2013 | 9:58:23 AM
Would love to see if the numbers say CBS feud was worth it
I remember you asking if it was all worth it, and I still would love to see the real numbers. I mean, they lost essentially 3% of their entire customer base and all the future revenues that entails. Was that worth it to essentially kick CBS in the shin? Seems like a more productive path would be something like covertly offering support to services and companies like Aereo if they really want things to change.

Also, when he says this:

"We're going after DSL," Marcus said. "I'm challenging our team to convert at least half a million DSL subscribers over the next 18 months."

I'm not sure that's a particularly amazing challenge, since Verizon is intentionally driving many of those customers into Time Warner Cable's arms through rate hikes, forced landline/DSL bundles. They no longer want them. Scooping them up as the remaining monopoly provider isn't exactly rocket science.
Flash Poll
From The Founder
Networks of the future will rely on "white box" switches and servers rather than proprietary hardware and that's going to alter the shape of the communications industry. Who says so? John Chambers.
LRTV Custom TV
The Benefits of HyperScale Clouds for NFV

3|27|15   |   01:50   |   (0) comments


Hyperscale cloud has been developed by the Internet giants to support the creation and delivery of software-based services at blistering speeds, and at the lowest possible cost. The original ETSI NFV vision was to adopt hyperscale cloud architecture and practices. This vision has become somewhat obscured along the way, due to misunderstandings about the hyperscale ...
LRTV Huawei Video Resource Center
eLTE Rapid Meets the Need for Speed

3|26|15   |   4:45   |   (0) comments


Designed especially for emergency and dedicated ad hoc local mobile communications coverage, Huawei's eLTE Rapid solution can deliver trunked voice, video and data coverage for multiple users over a 6km range and be set up in just 15 minutes, explains Huawei's Norman Frisch.
LRTV Huawei Video Resource Center
On Videos: Challenges & Opportunities

3|26|15   |   5:56   |   (0) comments


Most everything is now connected. And along with 4K and 4G technologies, everyone could be creating and broadcasting video contents. Users are expecting better video experience with any screen, anywhere and anytime. Operators will meet new challenges, but also see some big opportunities.
LRTV Custom TV
JDSU: Delivering Dynamic Networks for a Personalized Experience

3|26|15   |   5:59   |   (0) comments


Light Reading speaks to JDSU at Mobile World Congress 2015 about new solutions in the areas of HetNets, VoLTE, backhaul, virtualization, big data analytics, and real-time intelligence.
LRTV Custom TV
Smarter Service Chaining & New Ways to Benefit From Qosmos Technology

3|25|15   |   03:11   |   (0) comments


David Le Goff, director of strategic and product marketing at Qosmos, explains how the company has added application awareness to subscriber information to make service chaining more efficient and reduce costs for networking and infrastructure. In addition, Qosmos technology, which has been delivered as C libraries, is now also available as a virtual machine, ...
Between the CEOs
Qosmos CEO: The Changing Face of DPI

3|24|15   |   13:53   |   (0) comments


LR CEO and Founder Steve Saunders sits down with the head of Qosmos to talk about the changing state of the art in deep packet inspection technology, including its role in SDN and NFV architectures. Also, how the comms market is becoming more like the automotive industry.
LRTV Huawei Video Resource Center
FC Schalke Scores With Its Agile Stadium

3|24|15   |   6:23   |   (0) comments


Top German soccer club FC Schalke 04 has deployed a new, agile WiFi network from Huawei in its Veltins-Arena stadium and is reaping the benefits in terms of customer satisfaction and business opportunities, explains marketing chief Alexander Jobst.
LRTV Huawei Video Resource Center
Huawei’s Insights on Mobile Video

3|24|15   |   7:51   |   (0) comments


More people than ever are now watching videos on smartphones. Seventy percent of mobile traffic will be video traffic until 2018. In this video, Huawei's exports give their insights on mobile video in terms of business model, network planning and 4G network construction.
LRTV Documentaries
The Rise of Industry 4.0

3|24|15   |   02:26   |   (9) comments


Are you ready for the fourth industrial revolution? It's a big deal for influential operators such as Deutsche Telekom.
LRTV Huawei Video Resource Center
Getting Connected With eLTE

3|23|15   |   06:04   |   (0) comments


Trunked radio communications have entered the 4G LTE world, and with Huawei's eLTE solution, can now deliver a full range of data and video services as well as push-to-talk voice, explains Huawei's Norman Frisch.
LRTV Huawei Video Resource Center
Funkwerk’s on Track With Huawei

3|19|15   |   3:23   |   (0) comments


GSM-R technology specialist Funkwerk and Huawei have forged a partnership that is benefiting both parties, notes Funkwerk's Gottfried Winter.
LRTV Documentaries
How EANTC Tested Cisco's Virtualization Solutions

3|18|15   |   5:49   |   (0) comments


Carsten Rossenhövel, managing director of independent test lab EANTC, tells Light Reading founder and CEO Steve Saunders about the innovative approach his team had to take when validating Cisco's service provider virtualization and cloud solutions.
Upcoming Live Events
April 14, 2015, The Westin Times Square, New York City, NY
May 5, 2015, Hyatt McCormick Place, Chicago, IL
May 6, 2015, Georgia World Congress, Atlanta, GA
May 12, 2015, Grand Hyatt, Denver, CO
May 13-14, 2015, The Westin Peachtree, Atlanta, GA
June 8, 2015, Chicago, IL
June 9-10, 2015, Chicago, IL
June 9, 2015, Chicago, IL
June 10, 2015, Chicago, IL
September 29-30, 2015, The Westin Grand Müchen, Munich, Germany
All Upcoming Live Events
Infographics
Hot Topics
The Rise of Industry 4.0
Ray Le Maistre, Editor-in-chief, 3/24/2015
Google Hires Wall Street's Most Influential Woman as CFO
Dan Jones, Mobile Editor, 3/24/2015
AT&T Woos SMBs With Small-Scale WiFi
Sarah Thomas, Editorial Operations Director, 3/26/2015
Net Neutrality Suits: Only The Beginning?
Alan Breznick, Cable/Video Practice Leader, 3/24/2015
Average US Broadband Speeds No Great Shakes
Mari Silbey, Independent Technology Editor, 3/25/2015
Like Us on Facebook
Twitter Feed
Webinar Archive
BETWEEN THE CEOs - Executive Interviews
LR CEO and Founder Steve Saunders sits down with the head of Qosmos to talk about the changing state of the art in deep packet inspection technology, including its role in SDN and NFV architectures.
Chattanooga’s EPB publicly owned utility comms company has become a poster child for how to enable a local economy using next-gen networking technology. Steve Saunders, Founder of Light Reading, sits down with Harold DePriest, president and CEO of EPB, to learn how EPB is bringing big time tech to small town America.
Cats with Phones
Interspecies Phone Love Click Here
"No, you hang up."
"No, YOU hang up."
Latest Comment