Advertisement
News
Advertisement

TWC’s video subs down, business services booming in Q3

Mon, 11/05/2012 - 2:30pm
Mike Robuck

Time Warner Cable’s quarterly profit and video subscriber losses were below Wall Street’s projections, but data and business services continued to be a boon to the company’s bottom line.

Time Warner Cable’s net income increased to $808 million, or $2.60 a share, in the third quarter, compared with $365 million, or $1.08 a share, a year ago. Excluding one-time items, Time Warner Cable’s per-share earnings rose 27 percent to $1.41, compared with $1.11 in the same quarter a year ago. Thomson Reuters analysts had projected an average per-share profit of $1.43 and revenue of $5.39 billion.

Partially due to promotions by AT&T and Verizon, as well as the sluggish economy, Time Warner Cable lost 140,000 video subscribers in the quarter, which was more than analysts’ projections.

Time Warner Cable President and COO Rob Marcus said during the earnings call that the Los Angeles, Carolinas and Northeast markets fared better on the video subscriber losses when compared to the New York City, Midwest and Texas markets. The Midwest markets included the former Insight Communications systems.

Marcus and Time Warner Cable CEO Glenn Britt touted the continued success of the operator’s business services sector during the earnings call. Time Warner Cable’s business services revenue increased by 27 percent to $493 million in the quarter. Marcus said business services contributed more than half of Time Warner Cable’s organic revenue growth in the third quarter.

Time Warner Cable increased its sales account executives by more than 300 year-over-year, and it increased the number of commercial buildings connected to its network by roughly 30,000 in the quarter.

“At the end of the quarter, we had around 700,000 buildings on our network, with more than 30,000 of them lit with fiber,” Marcus said. “We now have 550,000 business services customer relationships. Most are still small businesses, but we continue to move up market with Ethernet and direct Internet access products, which generated more than a third of business services high-speed data revenue in Q3.”

In addition to moving up into the enterprise sector, Marcus said Time Warner Cable was seeking to sell more of its services to its single-play customers, which currently account for nearly 60 percent of its business customers. Business-class phone revenues grew almost 60 percent in the quarter.

Time Warner Cable added more than 450 cellular backhaul towers in the third quarter and was generating revenue from more than 9,000 cellular radios. Going forward, Time Warner Cable has a “healthy backlog” of additional towers under contract, Marcus said.

Last month, Time Warner Cable launched its cloud-based service-as-as-software offering for small- and medium-size businesses, and its NaviSite division saw its revenue grow more than 20 percent from the same quarter a year ago.

“So long story short, there’s a lot of opportunity in business services, and we’re executing well,” Marcus said.

Like other service providers, the current election cycle has been a boon to Time Warner Cable’s advertising efforts. For the quarter, advertising revenue increased by 22 percent to $264 million.

Time Warner Cable added 85,000 data subscribers, which missed analysts’ average projection of 96,000, and its broadband services revenue grew 14.3 percent. The company’s phone subscribers were relatively flat year-over-year.

“We continue to grow our business services revenue at a very healthy clip, and again we captured share in residential broadband,” Britt said. “In addition, we’re benefiting from the election cycle. Advertising was a big driver of our results in the third quarter, and political spending in Ohio and Wisconsin has been very strong in the weeks leading up to the election. This is a great business for us, the rates are attractive and the margins are more attractive still.”

Other highlights from the earnings call included:

  • Over the next 60 days, Time Warner Cable will increase data subscriber speeds on its standard tier by 50 percent, to as much as 15 Mbps on the downstream. Time Warner Cable is increasing its speeds in order to lure more customers over from DSL-based services.
  • Time Warner Cable had its best quarter for DOCSIS 3.0 subscriber increases, with 73,000 net adds. DOCSIS 3.0 and Turbo tier subscribers now account for 22 percent of the company’s residential data subscriber base.
  • The nation’s second-largest cable operator installed 8,000 Wi-Fi access points in the third quarter, with 6,700 in its Los Angeles system. Marcus said Time Warner Cable would continue to pursue Wi-Fi build-outs and that its TWC WiFi Finder app was making it easier for customers to find and use Wi-Fi hotspots. Glenn said Wi-Fi looked promising for reducing customer churn, but it was still “early days.”
  • Last month, Time Warner Cable started charging its data customers a $3.95-a-month cable modem fee. Marcus said about 3 percent of Time Warner Cable’s subscribers have elected to install their own cable modems instead of paying the fee.
  • Time Warner Cable’s high-end SignatureHome service increased by 7,000 in the quarter, for a total base of 67,000.
  • Time Warner Cable is cross-promoting its services in 250 Verizon Wireless stores and roughly 650 third-party agent stores. The cross-promotion efforts with Verizon Wireless will improve near the end of the month when Verizon Wireless reps “will be able to enter an order and it will automatically enter into our billing system,” Marcus said.
  • Marcus said that AT&T's U-verse products were available in about 25 percent of Time Warner Cable's footprint, and Verizon's FiOS services were available in about 12 percent of the homes passed by Time Warner Cable.

“Our third quarter was in many ways like the quarter that preceded it: More than 9 percent revenue growth with very steady margins and increasing return of capital to shareholders,” Britt said. “We’ve been able to generate these steady results despite a fair amount of noise in the environment around us. In particular, the economy continues to bounce along the bottom, and we have intense competition, especially here in New York City.”

Advertisement

Share This Story

X
You may login with either your assigned username or your e-mail address.
The password field is case sensitive.
Loading