Bloomberg News

Time Warner Cable Profit Misses Estimates on Subscriber Loss

October 27, 2011

(Adds analysts’ comments starting in fourth paragraph.)

Oct. 27 (Bloomberg) -- Time Warner Cable Inc., the second- largest U.S. cable-television operator, reported third-quarter profit that missed analyst’s estimates after losing video subscribers.

Earnings per share increased to $1.08, the New York-based company said in a statement today. Analysts projected $1.14, the average of estimates compiled by Bloomberg.

Time Warner Cable lost 126,000 video subscribers as customers defected to Verizon Communications Inc.’s FiOS, AT&T Inc.’s U-verse and DirecTV, according to Vijay Jayant, an analyst at ISI Group in New York. Analysts estimated a loss of 113,000, according to data compiled by Bloomberg. Overall customers -- video, phone and broadband for corporations and households -- fell by 16,000 in the quarter.

“The aggregate customer number is one investors watch, and a negative number may cause the stock to be weak again,” said Laura Martin, an analyst with Needham & Co. in Pasadena, California.

Time Warner Cable fell 6.9 percent to $65.75 at 9:39 a.m. in New York. It has gained 7 percent this year.

DirecTV’s “Sunday Ticket” promotion, which gave new customers a free subscription to access all Sunday National Football League games during the year, likely accelerated Time Warner Cable’s video decline, Jayant said. DirecTV will release its quarterly results Nov. 3.

Betting on Broadband

Time Warner Cable’s revenue rose 3.7 percent to $4.9 billion, compared with analysts’ average estimate of $4.94 billion. The company continued share buybacks, repurchasing 8 million shares for $573 million in the quarter.

Net income fell to $356 million from $360 million, or $1 a share, a year earlier.

The company gained 89,000 residential high-speed data clients and 16,000 business customers. Residential broadband revenue grew 7.8 percent while video sales fell 0.5 percent.

Chief Executive Officer Glenn Britt is positioning Time Warner Cable to be an Internet provider first and a video operator second, according to Craig Moffett, an analyst at Sanford C. Bernstein & Co. in New York.

“Broadband is Britt’s anchor product now,” Moffett said. “The cable operators are running away from AT&T and Verizon in the broadband business, which has become the engine that’s carrying Time Warner Cable.”

Fourth-quarter video and broadband net additions are trending similar to a year ago, Time Warner Cable Chief Financial Officer Irene Esteves said on a conference call. Voice-line additions are trending lower, she said.

To fuel demand for its video product, the company introduced an application this year that lets people watch live programming on Apple Inc.’s iPad tablet computer. Time Warner Cable plans to make the app available on other devices, Britt said on today’s call.

(Time Warner Cable started a conference call at 8:30 a.m. New York time. Visit www.timewarnercable.com/investors to listen.)

--Editors: Ville Heiskanen, Peter Elstrom

To contact the reporter on this story: Alex Sherman in New York at asherman6@bloomberg.net

To contact the editor responsible for this story: Peter Elstrom at pelstrom@bloomberg.net


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