Time Warner Cable to 'Go It Alone' With VoIP

Analyst estimates that the MSO's decision could cost Sprint as much as $250 million annually over the next four years

Jeff Baumgartner, Senior Editor

March 11, 2010

2 Min Read
Time Warner Cable to 'Go It Alone' With VoIP

Time Warner Cable Inc. (NYSE: TWC) confirmed that it will phase out its VoIP relationship with Sprint Corp. (NYSE: S) over the course of about four years under a project the MSO's calling "Go It Alone."

A winding down of the deal, which supports most of TWC's 4.1 million digital phone customers, is expected to hit Sprint's wireline base hard in the coming years.

Sanford C. Bernstein & Co. Inc. analyst Craig Moffett was first to report that Sprint was on the brink of losing that contract, estimating in a note issued Wednesday that the loss of that business could cost Sprint as much as 25 percent of its wireline EBITDA -- or $250 million annually -- over the next few years.

Based on his calculations, TWC pays Sprint roughly $10 or $11 per month per VoIP subscriber under the transport and interconnection deal. TWC and Sprint inked the initial long-term contract in late 2003.

"In the current version of our model, we assume that Time Warner Cable's payments to Sprint start diminishing in Q3 2010, until they reach zero by the beginning of 2014," wrote Moffett, who cut his target on Sprint shares from $3 to $2.50.

Time Warner Cable spokesman Justin Venech said the decision was economically driven, and would give the MSO an "opportunity to reduce our costs."

TWC, which spun off from Time Warner Inc. (NYSE: TWX) last year, isn't saying when the MSO expects to take all its VoIP functions in-house, but Venech confirmed that the process, which will be done in phases, will take about four years. (See Time Warner Finalizes Cable Spinoff Details .)

He did note that the change in the VoIP relationship will have no effect on TWC's investment and relationship with Sprint-owned Clearwire LLC (Nasdaq: CLWR). TWC has already launched mobile WiMax services that piggyback on the Clearwire network in portions of North Carolina and Hawaii and in Dallas and San Antonio. (See Time Warner Cable Hits WiMax Accelerator and Cable Plays Clearwire Card.)

— Jeff Baumgartner, Site Editor, Light Reading Cable


About the Author(s)

Jeff Baumgartner

Senior Editor, Light Reading

Jeff Baumgartner is a Senior Editor for Light Reading and is responsible for the day-to-day news coverage and analysis of the cable and video sectors. Follow him on X and LinkedIn.

Baumgartner also served as Site Editor for Light Reading Cable from 2007-2013. In between his two stints at Light Reading, he led tech coverage for Multichannel News and was a regular contributor to Broadcasting + Cable. Baumgartner was named to the 2018 class of the Cable TV Pioneers.

Subscribe and receive the latest news from the industry.
Join 62,000+ members. Yes it's completely free.

You May Also Like