Slow Start for TWC's Fastest Broadband
Time Warner Cable Inc. (NYSE: TWC) added 212,000 high-speed Internet subs in the first quarter, but just a sliver of that total -- roughly 1,000 -- signed up for the MSO's speedy Docsis 3.0 services.
TWC chief financial officer Rob Marcus revealed that number this morning as the MSO presented its first-quarter results. Although Docsis 3.0 service adoption is off to a slow start, TWC's fastest single-channel Docsis tier, "Road Runner Turbo," is faring much better. Marcus said 77,000 of TWC's net cable modem sub adds in the period took the Turbo, and that more than 11 percent of TWC's residential high-speed Internet base now take that product.
The number of wideband subscription adds in the first quarter are consistent with recent trends at TWC, the only major US MSO so far that's even been willing to share those numbers. In January, TWC revealed it added only about 2,000 wideband subs in the fourth quarter of 2009. (See 2K for D3 in Q4.)
TWC chief operating officer Landel Hobbs later acknowledged that the MSO's Docsis 3.0 deployment in NYC "is still in its early days, with subs in the low thousands."
And TWC, whose current D3 lineup tops out at 50-Mbit/s downstream, may not offer the best example of how well or how poorly these faster, but generally more expensive, Docsis 3.0 services are performing.
TWC has been far less aggressive with wideband deployments than have some other major MSOs, such as Comcast Corp. (Nasdaq: CMCSA, CMCSK), but it's started to ramp those plans up with launches in NYC, Dallas, Cincinnati, Buffalo, and Syracuse. It's also getting ready to introduce it in Charlotte, N.C., according to Hobbs.
Comcast, which has 80 percent of its plant wired up for wideband and intends to finish the job later this year, hasn't disclosed any D3 subscriber figures.
Although TWC's Docsis 3.0 service hasn't gone gangbusters, there are recent indications that demand for wideband modems is starting to rise. Earlier this week, Arris Group Inc. (Nasdaq: ARRS), a key supplier of Docsis modems and network gear that counts Comcast and TWC as its largest customers, reported that 14 percent of all Docsis standalone and VoIP-capable modems it shipped in the first quarter were of the wideband variety. Its D3 CPE mix was less than 10 percent in the fourth quarter of 2009. (See D3 CPE Shipments on the Upswing .)
Time Warner Cable turned in a solid first quarter, as revenues rose amid an advertising rebound and continued growth in its business services division. Revenues beat Wall Street expectations, but its profit, though up year-on-year, did not. TWC's free cashflow, at $652 million, remained strong. (See Time Warner Cable Posts Q1.)
Table 1: TWC Q1 at a Glance
|Q1 2009||Q1 2010||Change (%)|
|Net Income ($B)||0.164||0.214||30%|
|Share Price ($)||31.12||56.58||82%|
|Source: Time Warner Cable, Yahoo Finance|
Table 2: TWC vs. Wall Street
|Analysts' Consensus Estimate Q1 2010||Actual Q1 2010|
|Source: Thomson Reuters|
On the subscriber front, TWC lost more basic video subs but added customers in its other service categories, though at a slower pace than it did in the year-ago period.
Table 3: Sub Update
|Q1 2009 Sub Adds/Losses||Q1 2010 Sub Adds/Losses||Cumulative Sub Total (End of Q1*)|
|Total video net adds||36,000||-42,000||12.81 million|
|Digital video adds||121,000||102,000||8.96 million|
|High-speed Internet adds||225,000||212,000||9.20 million|
|Digital voice adds||174,000||86,000||4.24 million|
|Source: Time Warner Cable |
*Residential subscribers only
"The economy remained weak, and subscriber net adds declined year-over-year, but importantly, net adds showed an improving trend as the quarter proceeded," TWC president and CEO Glenn Britt said on this morning's call.
He said 19 percent commercial service revenue growth in the first quarter was higher than any of last year's financial periods. TWC, which added 9,000 commercial customers in the quarter, still expects that budding piece of the business to eclipse 20 percent growth for 2010.
Some of that growth will come from cell backhaul. Time Warner Cable is getting backhaul revenue from cell towers outfitted with 3,600 radios, with another 1,800 already under contract. (See Cellular Backhaul: Is There Gold in Them Thar Towers?)
— Jeff Baumgartner, Site Editor, Light Reading Cable