Parsons Keeps Time Warner Cable IPO Option Open

Time Warner chairman and CEO Richard Parsons told analysts Wednesday that the planned spinoff of its Time Warner Cable unit into a separate publicly traded company won’t happen until at least Feb. 6, but the media giant is also pursuing an initial public offering for the division.

Time Warner had hoped to take the cable unit public through its joint purchase of Adelphia Communications with Comcast in July. As part of the $17.4 billion deal, Adelphia creditors will receive $12.5 billion in cash and a 16% interest in Time Warner Cable. Time Warner had expected to be able to take the cable unit public by folding it into the already-traded Adelphia shell.

Adelphia’s fifth plan of reorganization was approved by a federal bankruptcy court in Manhattan Jan. 5, but due to objections from some bondholders, the effectiveness of that plan has been temporarily stayed.

On a conference call with analysts to discuss the company’s fourth-quarter results, Parsons said the stay will be in place “until at least Feb. 6.” In the meantime, he added that Time Warner is continuing to pursue an IPO of the cable unit -- it filed a registration statement with the Securities and Exchange Commission in October -- just in case.

“We are continuing to pursue the registration-statement process until the bankruptcy plan becomes effective,” Parsons said. “We are committed to proceeding on both paths to have Time Warner Cable become a public company as expeditiously as possible.”

Parsons added that Time Warner is also continuing negotiations with Liberty Media concerning Time Warner shares the Denver-based media company owns. Liberty owns about 4% of Time Warner’s outstanding shares, valued at about $3 billion. Last year, it was expected that Liberty would exchange a portion of that interest in Time Warner for cash and a nonstrategic asset, most likely the Atlanta Braves Major League Baseball team.

Parsons would not identify what assets Time Warner is considering exchanging for the stake, but he said he was hopeful that a resolution to the matter would come “shortly.”

For the quarter, Time Warner reported an 8% increase in revenue to $12.5 billion and adjusted operating income before depreciation and amortization (AOIBDA, a measure of cash flow) was up 13% to $3 billion, driven largely by increases at its cable systems and networks.

At the cable systems, revenue rose 58% to $3.7 billion, driven mainly by its acquisition of about 3 million subscribers from Adelphia and Comcast. AOIBDA for the period rose 46% to $1.3 billion, again mainly due to the Adelphia acquisition.

Basic subscribers declined by about 23,000, mostly due to a continued fall-off in subscribers at the former Adelphia systems. Basic customers rose by 29,000 at historic Time Warner Cable systems in the period, offset by a loss of 52,000 customers at the former Adelphia properties.

Telephony customers grew by 211,000 in the quarter, an increase over the 187,000 added during the third quarter. Digital-cable customers increased by 246,000 to 7.3 million and high-speed-Internet subscribers rose by 246,000 during the period to 6.6 million.

On the conference call, Parsons said the company will begin a major push into business telephony this year, earmarking small and midsized businesses. While he gave no details as to which markets would receive the service first, Parsons added that business telephony would be available in most of Time Warner’s legacy (non-Adelphia) footprint by the end of the year.

At the networks -- which include Home Box Office and Turner Broadcasting System -- revenue was up 10% to $2.7 billion and AOIBDA rose 12% to $861 million.

Time Warner shares were down 7 cents each to $21.97 per share in early trading Wednesday.