Time Warner Cable (TWC), the second-biggest U.S. cable company, met financial expectations for Q4. But key subscriber growth metrics fell short of expectations.
Why? On the company’s earnings call, CEO Glenn Britt outlined the three reasons:
- The economy is weak; “that’s not news to anyone.” consumers are spending less.
- Telco competition from AT&T (T) and Verizon (VZ) has expanded to a more significant fraction of footprint. TWC benefitted from same phenomenon when rolled out digital phone. (Wireless substitution also affecting phone sales, CFO Robert Marcus added later.)
- Always balancing subscriber growth versus profits versus long-term quality of subscriber base, via marketing spend, credit policies, etc. Remained conservative on all of these.
Ad growth also fell off a cliff. Full-year ad sales increased 4% ($31 million) to $898 million, “due mainly to an increase in political advertising revenues, offset partially by declines in other categories.” During 2007, ad revenues increased 31% ($203 million) to $867 million.
Time Warner Cable was also the latest to write off a big chunk of its investment in high-speed wireless firm Clearwire (CLWR). Specifically, it took a $367 million noncash impairment on its $550 million investment; two-thirds of its investment. TWC said it expects to roll out a wireless service with Clearwire in at least one city this year.
- Revenue: $4.4 billion vs. $4.4 billion consensus
- EBITDA: $1.66 billion vs. $1.65 billion Goldman est.
- Digital cable net sub. adds: 44,000 vs. 140,000 Goldman est.
- Cable Internet net sub. adds: 113,000 vs. 189,000 Goldman est.
- Digital phone net sub. adds: 137,000 vs. 180,000 Goldman est.
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