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Broadband, business services shine in TWC’s Q3 results

Thu, 10/27/2011 - 2:53pm
Mike Robuck

To borrow a phrase from an infamous actor, Time Warner Cable’s high-speed Internet services were “winning” in the third quarter.

Time Warner Cable CEO Glenn Britt had previously said that data services were going to be the company’s anchor product going forward, and that point was driven home during this morning’s earnings call.

“Broadband is a powerful service for which there appears to be unquenchable consumer thirst,” Britt said. “We have a great story here. We’re winning share while increasing RPU. Over time, we’ll devote much more of our plant’s capacity to broadband, and we’ll allocate more capital to this service as we continue to enable customers to access innovative and increasingly bandwidth-intensive Internet applications.”

Time Warner Cable added 89,000 residential data customers in the third quarter. Time Warner Cable CFO Irene Esteves said the company signed up 97,000 broadband-only subscribers in the quarter, thanks in part to a single-play promotion during the quarter and the return of college students.

Time Warner Cable’s revenues benefited from more customers taking the faster, more expensive tiers. The nation’s second-largest cable operator added 79,000 Turbo and 43,000 Wideband customers in the quarter. Turbo and the DOCSIS 3.0 Wideband tiers now account for 18 percent of the company’s residential high-speed data subscribers. Esteves said Wideband subscriber numbers nearly doubled from the second quarter and increased tenfold from the same quarter a year ago.

On the business services side, Time Warner Cable added 16,000 data subscribers, which was its highest net quarterly adds ever, according to Esteves.

Chief operating officer Rob Marcus said the company can do a better job of winning DSL customers over from telcos by communicating the benefits of its faster speeds, including less video buffering and being able to connect more devices in a home, instead of relying on a “naked speed message.”

While Britt was bullish about the company’s high-speed data prospects, he characterized video as “a very good, mature business.” Time Warner Cable lost 128,000 video customers in the third quarter, which was a 29,000 improvement from the same quarter a year ago.

Time Warner did see a spike in its video customers in September, and its Spanish-language tier, called El Paquetazo, continued to do well, particularly in Texas and Southern California.

Time Warner Cable lost 8,000 phone subscribers in the quarter, but chief operating officer Rob Marcus said the company would become more aggressive on its phone prices and marketing efforts.

Time Warner Cable’s third-quarter revenues received a big boost from its business services sector, which accounted for 55 percent of its revenue growth in the third quarter. Cloud vendor NaviSite, which Time Warner Cable bought for $230 million earlier this year, accounted for 20 percent of the company’s revenue growth. Business services revenues in the quarter increased 36 percent to $387 million. 

For commercial services, Time Warner Cable added 2,000 video subscribers and 13,000 voice customers.

“Business services is mostly about share shift, but I think we can also grow the category by applying new technology, including the capabilities we acquired with NaviSite,” Britt said. “I can see the opportunity to grow this business even faster if we make more investments, expanding our sales force and extending the plant to increase service ability in certain parts of our footprint.”

Cell backhaul revenue was $34 million in the quarter, which was a 55 percent increase over the third quarter a year ago. Time Warner Cable has an installed base of 7,200 revenue-generating radios and a “meaningful” backlog under contract.

Time Warner Cable posted a profit of $356 million, which was slightly off from $360 million a year ago. The company’s revenue increased almost 4 percent to $4.91 billion. 

Esteves said Time Warner Cable was on track to meet its full-year guidance numbers, except for ad revenues.

“We’re focused on maximizing our opportunity in our two most promising areas, residential broadband and business services, while continuing to deliver both the content and the innovation that our customers expect in our video product,” Britt said, while noting that the company has continually updated its iPad app and is expected to offer similar functionality on additional devices later this year.

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