Video services

Time Warner Cable Bleeds Subs

Time Warner Cable Inc. (NYSE: TWC) posted a record net gain of 275,000 digital phone subs in the third quarter, but that was partly offset by a larger-than-expected loss of basic video subs.

Repeating a trend seen at Comcast Corp. (Nasdaq: CMCSA, CMCSK) during the quarter, Time Warner Cable lost 83,000 basic video customers, compared to about 50,000 expected by Sanford C. Bernstein & Co. Inc. . Time Warner Cable ended the quarter with 13.3 million basic video subs.

The bulk of those losses -- 66,000, or roughly 80 percent -- came from Dallas and Los Angeles. The Los Angeles system has been plagued by integration issues after Time Warner Cable and Comcast divvied up the systems that used to make up Adelphia Communications. Time Warner inherited the Dallas system from Comcast.

"But the playbook for cable system integration is, at this point, well understood, and one can reasonably predict a turnaround in L.A., in our view," said Sanford C. Bernstein analyst Craig Moffett, in a research note.

The situation in Dallas, thanks to "embedded service quality and reputation" issues may take much longer to fix, he suggested, noting that it's long been a "sub-par" system, and "years of neglect have left cable penetration in Dallas at the lowest levels of any major city in America."

Time Warner Cable fared better in other service categories. It added 522,000 revenue generating units, extending its total to 31.5 million. At the end of the quarter, about 6.9 million customers, or about 47 percent, subscribed to two more services. Fifteen percent took the MSO's "triple play" of video, voice, and data services.

The company added 128,000 digital video subs, giving it a total of 7.9 million. Thanks to record sign ups, Time Warner Cable ended the third quarter with 2.6 million digital phone customers, a penetration rate of 11 percent. The MSO added 224,000 cable modem customers, giving it a total of 7.4 million.

On the financial front, the MSO said net profit dropped to $248 million ($0.25 per share), versus $1.2 billion ($1.20 per share) a year ago, but the total was in line with analyst expectations. Revenues rose 25 percent to $4 billion. The operator also reaffirmed full-year 2007 revenues of $11.8 billion, and operating income before depreciation and amortization of $4.2 billion.

Speculation is also running rampant about the future of the MSO once Jeff Bewkes officially becomes the CEO of Time Warner Inc. (NYSE: TWX) in January. The going bet is the company will sell off a portion of the MSO. (See Bewkes Roundup .)

But not everyone is in that camp.

A "spin-off would seem ill-timed given all-time low valuations and sentiment; the market appears to have too little appetite to digest even the cable equity available today," wrote Moffett, who has a $46 price target on the stock. "An additional $20 [billion] cable float could cause severe indigestion."

Time Warner Cable Shares were up 20 cents (0.73%) to $27.75 each in early trading Wednesday.

— Jeff Baumgartner, Site Editor, Cable Digital News

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rjmcmahon 12/5/2012 | 2:59:08 PM
re: Time Warner Cable Bleeds Subs OldPOTs;

Thanks for the post. I'm not real trusting of VZ numbers but it does look that Corning is increasing mfg capacity of optical fiber in both the US and China.
OldPOTS 12/5/2012 | 2:59:08 PM
re: Time Warner Cable Bleeds Subs (attention rjm)
11/11 competitor VZ in Dallas claims that more than 150,000 Dallas homes are on FIOS Internet service, with more than 100,000 subs to television service. Service is available to 400,000 homes (passed) in the area.

Nationally ~1.1 million Internet and 515,00 TV Subs @ end June.

Employees in the area are testing ultra high speed @ 100mbs downloads to their home, but no promised commercial offering yet.
Jeff Baumgartner 12/5/2012 | 2:59:07 PM
re: Time Warner Cable Bleeds Subs still, looks like TWC had better get this historically 'sub-par' system whipped into shape pdq.
bollocks187 12/5/2012 | 2:59:06 PM
re: Time Warner Cable Bleeds Subs RJM

It seems that you are somewhat of a 'sophistcate' in one case you argue for competition and open networks : http://www.lightreading.com/bo...

And yet in this last Number 4 you proclaim an RBOCs outdated FiOS technology is Game set and match !

rjmcmahon 12/5/2012 | 2:59:06 PM
re: Time Warner Cable Bleeds Subs I'm just waiting for the really good deal before I have to change my email address again.

OldPOTs; Prices aren't going down in most durables. The boys running the dollar printing presses have made sure of that.
OldPOTS 12/5/2012 | 2:59:06 PM
re: Time Warner Cable Bleeds Subs As a TWC Sub for 'basic analog tv' and internet, I am in the 1/3 minority in my area. There is still a cost savings for taking both and they havent taken my copper yet. The analog Subs are adiment about what they have, including law suits and protests to keep the franchise going. So TWC plans to keep converting to analog for some time after FCC Broadcast digital conversion.

Most of the other 2/3 though have not opted for TV, but for better internet service. They get satillite TV that right now has more (almost) HD and service.

rjm -Also note that most houses here have multiple TVs and because each TV has a settop box they probably are using cisco math counting every settop box. But FIOS has been making steady inroads fore more Subs, primarily packages. I'm just waiting for the really good deal before I have to change my email address again.

rjmcmahon 12/5/2012 | 2:59:06 PM
re: Time Warner Cable Bleeds Subs TWC would do best just to concede to VZ FiOS TV. I mean what does TWC have? A parent that happens to be one of the largest mass media companies in the world. Compared to what? FiOS TV has the potential to start selling targeted ads in local time slots, slots the Time Warner has to approve as local in the first place.

Hands down. FiOS TV. Game. Set. Match.
rjmcmahon 12/5/2012 | 2:59:05 PM
re: Time Warner Cable Bleeds Subs bollocks;

You may want to reread my posts. I don't argue for facilities based competition. It's a farce. FiOS TV brings nothing to the table. That's why they have to "bundle" it with what people really want which is better internet access. Few would buy FiOS TV if it weren't forced on them.
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