TWC’s Q1: ’Net Gains Offset Video Losses

A strong showing
in broadband and phone
customer additions
helped Time Warner Cable
offset heavier-thanexpected
losses in the first quarter,
and gave analysts
some hope that the rest of
the sector will report even
stronger results.

TWC kicked off the
2012 earnings season last
Thursday (April 26), reporting
a loss of 94,000
basic-video subscribers,
42% more than the 66,000
it lost in the prior year and more than the 61,000 most analysts
anticipated. But any disappointment on the video front was
offset by stronger than expected growth in advanced services.
The No. 2 U.S. cable operator blew away analysts’ consensus
estimates for broadband additions — 214,000 vs. consensus of
173,000 — and phone — 112,000 vs. consensus of 51,000.

That performance caused some analysts to see signs for improved
results across the entire sector.

“Today’s results seem to reaffirm that the cable train is
chugging along (in its seasonally strongest quarter),” wrote
ISI Group media analysts Vijay Jayant and Judah Rifkin in a
research note. “Things could be looking up for the entire sector
for 1Q earnings season.”

Those strong results
helped lift other
cable stocks, with
Comcast (up 2%), Cablevision
Systems (up
2%) and Charter Communications
(up 0.5%)
all showing gains, but
TWC shares were down
as much as 4% ($3.51
each) on April 26. TWC
rallied to close at $81.13,
down 1.2%. Miller
Tabak media analyst
David Joyce said the decline in TWC stock was likely a result of
profit-taking by investors, who then pumped that money into
other cable shares to take advantage of an anticipated increase
when they report results over the next two weeks.

Subscriber growth was a combination of strong marketing,
targeted promotions and the migration of single-and double-play customers to
triple-play packages,
chief operating officer
Rob Marcus said on a
conference call with analysts.
Triple-play customers
were up 125,000
to 3.8 million customers,
the MSO’s best performance
since 2009.

New York-based
TWC has started several
initiatives to further
drive improved
subscriber metrics, including
a plan to add
1,000 new residential
direct sales reps this
year and to retrain existing
inbound sales reps in a more disciplined approach to
selling and upselling, he said. “When we focus every person,
every campaign and every call on driving increased revenue
per call, we see results,” Marcus said.

Packaging also has played a role. TWC added 14,000
customers to its high-end Signature Home offering (it
now has about 50,000 Signature Home subscribers), and
its TV Essentials economy tier added 6,500 new customers,
bringing its total subscribers to about 11,000. TV Essentials
is acting as a low-price beacon for the cable operator, Marcus
said, noting that a significant amount of people who
call in for that package end up taking a higher tier.

TWC, a member
of the Spectrum-
Co partnership
with Comcast
and Bright House
Networks, also
launched a comarketing
with Verizon
Wireless during
the quarter, part of
the consortium’s
agreement to sell
its wireless licenses
for $3.6 billion.
While that deal is still awaiting Federal Communications
Commission approval, TWC is offering a $200
gift card to new Verizon customers in Raleigh, N.C.; Cincinnati
and Columbus, Ohio, and Kansas City, Mo., that also agree
to subscribe to one additional product from the cable company.
Marcus said those efforts will expand in the future.