Maybe Time Warner Cable doesn't need Comcast so badly after all.
Turning in its best operational performance in years, Time Warner Cable Inc. (NYSE: TWC) posted strong increases in broadband and voice subscribers in the fourth quarter. TWC also cut its video customer losses sharply for the quarter and even netted a gain for the month of December. As a result, it added both triple-play subscribers and overall residential customer relationships for the first time in a while.
Further, the No. 2 US MSO continued to roar ahead on the business service front, racking up another record quarter and year. It also scored well on the advertising front, matching its healthy results from the final quarter of 2012.
Speaking on the company's earnings call Thursday morning, TWC Chairman and CEO Rob Marcus made the case that his company actually "overdelivered operationally" for both the fourth quarter and the year. Besides the improved residential subscriber figures and business services and advertising revenue gains, he cited the company's progress in rolling out all-digital upgrades, boosting broadband speeds, improving customer service and reducing truck rolls.
Notably, these long-awaited improvements in Time Warner Cable's operational performance, after several years of mediocre or even dreadful quarterly results, come as industry pundits increasingly question whether Comcast Corp. (Nasdaq: CMCSA, CMCSK)'s proposed purchase of TWC will go through. In the latest development there, Comcast and TWC have just told the Securities & Exchange Commission that they now plan to complete the merger by August 12, six months later than originally planned, because of unexpected delays in the regulatory review process.
Questioned about the merger's prospects, Time Warner Cable executives insisted that the deal would still go through and made a point of not offering any financial guidance for the year because they don't expect the company to be around that long. "We look forward to closing soon," Marcus said. He said TWC officials continue to believe that "the deal will be great for our customers."
Nevertheless, if Time Warner Cable does end up going it alone for longer than expected, at least the MSO appears to be getting its house back in order again. It may even be poised for video subscriber growth again, given its dramatically lower customer losses in the fall quarter and the equally dramatic lower customer gains of its chief telco rival, AT&T Inc. (NYSE: T). (See U-verse TV Growth Hits Skids .)
The much lower video sub losses certainly stood out in TWC's earnings report. With the MSO now rolling out its TWC Maxx all-digital and broadband upgrades across the nation, it shed just 38,000 TV subscribers in the quarter, a huge improvement over the 103,000 residential video subs it lost a year ago and its best performance in years. Noting that TWC actually gained video subs in December and fared better in AT&T Inc. (NYSE: T) U-verse and Verizon Communications Inc. (NYSE: VZ) FiOS markets than others, company executives said they're sticking to their goal of adding video customers for the full year in 2015.
Moving on to other key services, Time Warner Cable netted 168,000 residential broadband subscribers, up from 93,000 a year ago and much higher than the Wall Street consensus forecast of just 38,000. As a result, it ended the year with nearly 11.7 million high-speed data customers, markedly more than its 10.8 million video customers.
More surprisingly, Time Warner Cable added 295,000 residential voice subscribers for the quarter, more than reversing a loss of 17,000 phone customers in the year-earlier period and far higher than the consensus forecast of 30,000. Company officials credited much of that big gain to their new triple-play offering, which allows existing double-play subs to add voice for just another $10 a month.
Accordingly, triple-play subscribers surged by 273,000 after several down quarters. So did TWC's total customer relationships, climbing by 67,000 to scale the 14.5 million level.
Finally, business services continued to be a bright spot for TWC. Its commercial unit brought in a record $755 million in the quarter, up from $616 million in the year-ago period, raising the MSO's annual total to more than $2.8 billion. Marcus said the unit remains "right on track" to reach its $5 billion goal by 2018.
Even though TWC fell shy of some Wall Street financial targets, industry analysts came away impressed with the results. "Time Warner Cable hasn't exactly climbed out of its sickbed to start dancing -- revenues were light, programming costs are still spiraling higher -- but the company is showing unmistakable signs of life," Craig Moffett, a principal in MoffettNathanson Research, wrote in a research note to clients today. "The company surely isn't out of the woods just yet -- revenues and margins are a bit light -- but at least things are moving in the right direction."
— Alan Breznick, Cable/Video Practice Leader, Light Reading