x
FTTx

Time Warner Cable Braces for Bad Economy

Cable is generally considered to be recession-proof, but Time Warner Cable Inc. (NYSE: TWC) president and CEO Glenn Britt says its "naïve" to think that way now.

Britt discussed his firm's third quarter numbers and the MSO's decision to reduce its 2008 earnings outlook today. Earnings for the full year are now expected to be in the range of $1.04 to $1.07 per share, versus earlier guidance of $1.07 to $1.11 a share. (See TWC Posts Q3 and TWC Updates '08 Outlook.)

"If people continue to lose their homes and jobs, I would be naïve to assume that there would be no impact on our business," Britt said. "As we moved into the fourth quarter, we saw a significant slowdown in subscriber growth compared to last year, particularly for our video and voice services."

On the voice front, the MSO signed on 207,000 subs, 25 percent less than a year ago and about 15 percent lower than analyst expectations.

The MSO lost 31,000 basic video subs, better than the 83,000 basics it lost in the year-ago quarter, ending the quarter with 13.3 million total. About 70 percent of those losses came by way of the operator's lowest tier-video package, which runs about $13 per month. The operator also signed on 124,000 new digital video subs, just under the 128,000 it added a year ago.

But Time Warner Cable also warned that it has seen orders for premium video services, including pay-per-view, video on demand (VOD), and digital video recorders (DVRs), slow down. The MSO added 150,000 DVR subs in the period, off from a year-ago gain of 211,000.

By the same token, Time Warner Cable remained strong with high-speed data, adding 222,000 in the quarter, handily beating Sanford C. Bernstein & Co. Inc. 's expectation of 172,000 new adds.

"This provided further evidence that customers value the speed and reliability of cable over DSL," Britt said. Time Warner Cable did not provide an update on its plans to introduce Docsis 3.0 on a "surgical" basis. (See Britt: Docsis 3.0 Coming to NYC and 'Surgical' Strikes .)

Across the board, the MSO added 522,000 revenue-generating units (RGUs), down from 544,000 RGU adds a year ago

Another bright spot was commercial services, which brought in more than $200 million in revenues in the third quarter -- a first. It's a service category that's growing more than two times the rate of residential revenues, Britt said. (See TWC Bows Biz-Class Ethernet.)

For the third quarter, Time Warner Cable revenues rose 8 percent, or $339 million, to $4.3 billion. Net income for the quarter reached $301 million (31 cents per share), up from $248 million (25 cents per share).

DTV transition bump?
Like other operators, Time Warner Cable hopes to enjoy a windfall of new video subs before and after the February 2009 broadcast digital TV transition. (See DTV Transition Could Catalyze Cable.)

The MSO, following up on a similar strategy underway at Comcast Corp. (Nasdaq: CMCSA, CMCSK), is offering its basic video package for $7.95 per month for 12 months. It's also throwing in a year of free basic cable to new subs who also bundle in the MSO's entry-level cable modem service or digital phone "local" service for $24.95 per month. (See Free Cable! )

Time Warner Cable COO Landel Hobbs noted that the MSO did gain some new subs in Wilmington, N.C., which flipped the switch early. (See Wilmington Flips the Digital Switch .) However, the MSO didn't necessarily see a "big pop" when the cutover occurred on Sept. 8, so it expects to sign on new customers gradually as the nationwide cutover approaches.

— Jeff Baumgartner, Site Editor, Cable Digital News

Stephenchpl 12/5/2012 | 4:07:43 PM
re: Time Warner Cable Braces for Bad Economy

Time Warner is correct that as more people lose their jobs, in order to cut expensives, these people will drop their service.


I always wondered by cable service providers such as Time Warner doesn't provide a recession proof solution such as "pay as you use". It would be similar to on demand services and it may help them keep existing subscribers without losing them. This way, when the econony gets beter, these subscribers will upgrade their service with out losing them to another provider.


-Stephen Injury Lawyer Cherry Hill

tolo1987 12/5/2012 | 3:55:32 PM
re: Time Warner Cable Braces for Bad Economy

The MSO, following up on a similar strategy underway at Comcast Corp. (Nasdaq: CMCSA, CMCSK), is offering its basic video package for $7.95 per month for 12 months. It's also throwing in a year of free basic cable to new subs who also bundle in the MSO's entry-level cable modem service or digital phone "local" service for $24.95 per month. (See Free Cable! ) I wonder what will be the final conclusion of this case. Mike - the external hard drive dude


Hueyloo 12/5/2012 | 3:54:36 PM
re: Time Warner Cable Braces for Bad Economy




I also think it would be a good move for service providers such as Time Warner to provide a pay-as-you-go type service during the recession. It would be good way to attract and keep customers both in the short term and in the long term also. Customers will feel well looked after, which will increase the liklihood of them staying with the company and upgrading somewhere down the line.


James (on the web at mattress reviews)




tolo1987 12/5/2012 | 3:52:05 PM
re: Time Warner Cable Braces for Bad Economy

The MSO lost 31,000 basic video subs, better than the 83,000 basics it lost in the year-ago quarter, ending the quarter with 13.3 million total. About 70 percent of those losses came by way of the operator's lowest tier-video package, which runs about $13 per month. The operator also signed on 124,000 new digital video subs, just under the 128,000 it added a year ago.All in all, we have to choose to get the rrod fix soon.


kumaramitabh 12/5/2012 | 3:27:54 PM
re: Time Warner Cable Braces for Bad Economy The Digital Transition Scheduled to be completed in feb 2009 still could throw some surprises so far as Digital Cable Subscriptions are concerned. Digital cable is clearly an alternative available at a time when customers need to make a decision.
However it is quite trrue that the higher end services such as Viseo on demand are likely to be affected the most. The DVR subscriptions will depend on the pricings of DVR boxes to a greater extent than before, but are indeed an attration to move to digital cable.

http://www.mobiletvhome.com
Jeff Baumgartner 12/5/2012 | 3:27:46 PM
re: Time Warner Cable Braces for Bad Economy Yeah, i think the key is for cable operators to just get these over-the-air people through the door and hooked up with digital cable...that's a big first step, especially if we're talking about consumers who are so-called "cable-nevers." Later, they may have some luck upgrading them to HD and DVR services...if the economy improves AND the lower digital tiers whets their appetites for other digital services. But that's getting way ahead of ourselves. JB
HOME
Sign In
SEARCH
CLOSE
MORE
CLOSE