Subscriber Bleed Continues for TW Cable

Time Warner Cable Inc. (NYSE: TWC)'s third quarter bested Wall Street estimates, but it was also marked by subscription declines in basic and digital video services and slowed growth in most other categories.

The MSO's net income and revenues rose compared with the previous year and managed to edge out analyst expectations despite a tough economy and increasing competitive pressure from telcos and satellite TV providers.

Table 1: Q3 Financial Snapshot
Q3 2009 Q3 2010 Change
Revenues ($B) 4.49 4.73 5%
Net Income ($B) 0.268 0.300 12%
EPS ($) 0.76 1.00 32%
Source: Time Warner Cable

Table 2: TWC Vs. The Street, Q3 2010
Analysts' Consensus Actual
Revenues ($B) 4.72 4.73
EPS ($) 0.89 1.00
Source: Time Warner Cable and Bloomberg

But subscriber trends remain a concern. The MSO lost 155,000 video subscribers as basic tier customers left for new pastures. Analysts were expecting a loss of 130,000, according to Sanford C. Bernstein & Co. Inc.

However, the MSO also shed 46,000 digital video customers -- a category that has traditionally been marked by growth. TWC gained in other advanced service categories, but the rate of growth slowed compared with the same quarter last year.

Table 3: Subscriber Trends
Q3 2009 Q3 2010 Total
(End of Q3)
Total video net adds -84,000 -155,000 12.70 million
Digital video adds +8,000 -46,000 9.01 million
Residential High-speed Internet adds +117,000 +95,000 9.38 million
Residential digital voice adds +62,000 +22,000 4.32 million
Source: Time Warner Cable

Among bright spots, advertising revenues rose 22.5 percent, to $223 million, thanks to a boost in automotive, media, and political ads.

Capital expenses reached $2.1 billion in the first nine months of 2010, down 6.1 percent, due in part to decreased outlays for customer premise equipment such as set-tops and modems.

— Jeff Baumgartner, Site Editor, Light Reading Cable

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