Video services

TWC Grows Its RGU

Time Warner Cable Inc. (NYSE: TWC) was solid in its first quarterly report as a publicly traded company, posting a 61 percent increase in revenues, driven in part by recent system swaps and acquisitions. The MSO turned a profit of $276 million, or 28 cents a share, compared to $237 million, or 23 cents per share, in the year-ago period.

The company also added 910,000 net new revenue generating units (RGUs) in the quarter, a 35 percent increase from a year earlier.

TWC notched first-quarter revenues of $3.9 billion, up $1.5 billion. A $971 million chunk came from the addition of several "transactions" systems acquired via deals or swaps with Adelphia Communications and Comcast Corp. (Nasdaq: CMCSA, CMCSK). Another $212 million came via a consolidation of systems in the Kansas City region. Revenues rose 12 percent in the MSO's "legacy" systems, which include properties TWC owned before and after the "transactions" and the Kansas City Pool.

The company said total RGUs grew 3 percent and totaled 30.4 million at the end of the quarter.

Mirroring trends seen at MSOs such as Comcast and Cox Communications Inc. , bundled services were a key growth driver for TWC in the period. (See Comcast Banks on Triple Play.)

TWC ended the quarter with 6.5 million bundled customers, defined as subs who take two or more services. Subs who took three services -- voice, video, and Internet -- totaled 1.7 million.

President and CEO Glenn Britt, speaking Wednesday during a call with reporters and analysts, said those numbers should improve steadily as Time Warner Cable begins to offer bundles in the acquired systems.

The MSO had 13.4 million basic video subs at the end of the quarter, representing 51 percent of homes passed. It added 46,000 basic video subs, versus a net loss of 23,000 basics in the fourth quarter of 2006. TWC's legacy systems added 66,000 net basic video subs, up from 29,000 in the previous quarter, marking the seventh consecutive period of net additions in the category.

TWC added 279,000 digital video customers, extending its total to 7.5 million, and a penetration rate of 56 percent of the basic sub base.

Britt said the MSO has introduced "Start Over" -- a digital service that allows customers to restart select shows already in progress -- in five of its 23 divisions. He expects half of the MSO's divisions to offer it by year's end. Currently, about 100 networks are participating in Start Over.

Customers with access to the app can restart about 22,000 shows in a given month, according to TWC chief operating officer Landel Hobbs.

MSO is also working on an extension of that service called "Look Back," which will expand the time window in which shows recorded to the network can be accessed.

The MSO has also broadened the availability of its "More Movies On Demand" service to about half of its divisions. The service, first offered in Greensboro, N.C., last September, will offer as many as 1,500 movie titles by mid-year. Overall, the company believes it will serve up 1 billion on-demand streams throughout 2006, Hobbs said.

High-speed Internet
TWC signed up 356,000 residential cable modem subs, a 45 percent gain versus the previous quarter, giving it a total of roughly 7.0 million.

The operator ended the quarter with 2.1 million digital phone subs, marking a penetration of 12 percent in "service-ready" homes passed. TWC added 234,000 phone customers in the first quarter, with 210,000 of that total coming from its legacy properties.

The operator is also starting to offer phone service to business customers, including five cities so far, with plans to make it available to most of TWC's legacy footprint by the end of the year, according to Britt.

Hobbs noted that the company plans to launch a "local only" phone service in the back half of 2007. He declined to discuss pricing on that offering, other than to say it would be "compelling" and marketed as part of a larger service bundle.

Shifting to wireless, Britt called TWC's initial results via the Sprint Wireless (NYSE: PCS) joint venture "quite encouraging." So far, the operator has rolled it in five markets -- Dayton and Cincinnati, Ohio; Raleigh, N.C.; Kansas City, Mo.; and Austin and San Antonio, Texas -- and plans to offer the mobile service, now dubbed "Pivot," more broadly throughout the year.

— Jeff Baumgartner, Site Editor, Cable Digital News

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