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.

NOW WATCH: Tech Insider videos

Want to read a more in-depth view on the trends influencing Australian business and the global economy? BI / Research is designed to help executives and industry leaders understand the major challenges and opportunities for industry, technology, strategy and the economy in the future. Sign up for free at research.businessinsider.com.au.