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Time Warner Cable Survives Q4

Thanks in part to operational improvements at some newly acquired systems, Time Warner Cable Inc. (NYSE: TWC) posted largely in-line fourth quarter results today. (See TWC Posts Q4.)

That might not sound so impressive, but it's a score considering how the stock market has gone.

“Under normal circumstances, an ‘in-line’ quarter isn’t newsworthy. But in the wake of a relentless sell-off in cable stocks over the past three months, the fact that Time Warner Cable has managed to hit essentially all of its quarterly and annual marks must be judged a positive,” Sanford C. Bernstein & Co. Inc. analyst Craig Moffett wrote in a research note today. (See Cable's Fall Season .)

On a conference call with analysts, Time Warner Cable president and CEO Glenn Britt said recently acquired systems in Los Angeles and Dallas “have turned a corner and are poised to make a meaningful contribution in 2008.” Integration issues at those systems contributed to surprisingly large basic-video subscriber losses in the third quarter. (See Time Warner Cable Bleeds Subs.)

For the quarter ended December 31, the MSO recorded revenues of $4.1 billion, a 12 percent increase from a year ago, and net income of $327 million (33 cents per share), up from $266 million (27 cents per share).

For the full year, revenues jumped 36 percent to $16 billion. The MSO ended 2007 with free cash flow of $1.1 billion, ahead of guidance in the range of $800 million to $1 billion.

On the subscriber front, Time Warner Cable ended the year with 32.1 million revenue generating units (RGUs) following net additions of 591,000. Close to 7.1 million, or 48 percent of the MSO’s 14.6 million total “customer relationships” subscribed to two or more of its “primary” services (video, high-speed data, and voice). Roughly 2.4 million, or 16 percent, took all three services.

Like most other MSOs, Time Warner Cable did see its basic-video sub base decline. It ended the fourth quarter with 13.3 million basic subs, down 50,000 for the period. Moffett expected the MSO to lose about 57,000 basics.

But basic losses were partly offset by an increase of digital video customers, as Time Warner added 168,000 of those in the period, extending that total to 8 million -- a penetration rate of 61 percent.

Time Warner Cable signed on 214,000 high-speed data subs in the quarter, led by new sign-ups in the Los Angeles area. Time Warner ended the period with 7.6 million cable modem subs.

Digital voice services remained a strong point, as the MSO added 285,000 subs, a quarterly record, and increased its total to 2.9 million -- a penetration rate of 12 percent.

Looking ahead, Time Warner Cable expects 2008 revenues to rise 9 percent, with earnings per share from continuing operations of between $1.25 to $1.30.

Time Warner Cable’s quarterly and annual numbers did little to help its stock Wednesday, as shares were down 32 cents (1.31%), to $24.08 each in the early going.

— Jeff Baumgartner, Site Editor, Cable Digital News

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