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CBS MarketWatch

September 13, 2005 Tuesday 4:43 AM

David B. Wilkerson, MarketWatch

From Lexis Nexis

SAN FRANCISCO (MarketWatch) -- In a riposte to the demands of billionaire investor Carl Icahn, the chairman of Time Warner's entertainment and networks group told a gathering of investors Tuesday that the company's cable unit would remain a "strong growth business" over the next several years.

Icahn has demanded that the cable business be entirely spun off from Time Warner, as part of his plan to boost the company's share price. The financier said Monday that he wants to nominate one or more board candidates.

The Time Warner executive, Jeff Bewkes, appearing at the Merrill Lynch Media & Entertainment Conference in Pasadena, Calif., said cable offers competitive advantages over such rivals as regional Bell phone companies.

Bewkes added that the unit has proved to be "the strongest affiliate" of Time Warner's Turner and HBO networks and a "valuable partner" in the development of video-on-demand content.

In a separate presentation at the conference on Tuesday, Time Warner Cable Chairman Glenn Britt reiterated the company's target of at least 1 million digital-phone-service subscribers by the end of 2005. Britt noted that while it had taken the company four years to reach 600,000 cable subscribers, it took half that time for digital phone to reach that milestone.

This year, the company is focusing on subscriber acquisition, Britt said, so costs have increased.

Britt also reaffirmed the unit's assertion that subscribers to its new products -- digital cable, digital telephone, the video-on-demand service and broadband -- are less likely to cancel service than other users.

Bewkes also said that Time Warner remains committed to placing greater emphasis on making America Online an "audience business."

Time Warner shares closed at $17.98, down 23 cents, on volume of 23.9 million shares.