Time Warner Cable (TWC) Q3: Could Be Worse

Time Warner Cable (TWC) reported Q3 results (PDF). Revenue jumped 25% year-over-year to $4.0 billion, thanks in large part to acquisitions. (“Legacy” systems grew only 9% y/y.) Operating income increased 24% y/y to $681 million. Net income dropped to $248 million.

  • The big picture: Phone service is leading growth and triple-play bundles are keeping customers around. TWC lost 83,000 video subs during Q3, but added 233,000 high-speed Internet subs and 275,000 phone subs.
  • Triple play is cooking. Despite some price discount, churn “clearly” lower, ARPU higher, and management claims there’s no big customer drop-off after promotional first-year rates. Cable execs consistently say Triple Play subs are their most valuable.
  • Eyesores: Los Angeles and Dallas — lousy networks they acquired — which accounted for the vast majority of subscriber losses. TWC’s overall video penetration about 50%, and just in the “mid 30s” in those two markets.
  • Missing out by not having the Big 10 network? Customers don’t care!
  • No update on wireless strategy. “Pivot” partnership with Sprint, Comcast, etc. a back-end disaster. Looking at 4G, WiMax, and ways to use spectrum acquired during last year’s FCC auction.
  • No word on pressure from Telco TV (Verizon, AT&T). We expect to hear more in future quarters as build-out continues.
  • The TWC future: Faster Internet access, fixing crummy markets they acquired, quasi-DVR products, commercial phone service, International calling packs.

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