While Time Warner Cable anticipates rev and operating growth rates in the mid-to-high 30s in ’07, the performance of its stock—expected to begin public trading Thurs on the NYSE—may well hinge on clearing the smog afflicting its L.A. and Dallas markets. In a media briefing, execs noted that the pair represents half of the sub base acquired from Adelphia yet trails the MSO’s legacy systems by a large margin in basic (42%) and HSD penetration (17%). CFO John Martin said 80% of TWC’s 4Q sub loss occurred in these 2 markets where stemming sub losses, rolling out digital phone services, integrating disparate operating systems (L.A.), and upgrading inferior plants (Dallas) remain top priorities. He called ’07 a "stabilization year" in those markets. COO Landel Hobbs said he expects L.A. and Dallas to improve by next year. "We will see choppiness this year [as we] reprice and retool," he said. Despite TWC execs’ upbeat comments, Pali Research cautioned against enthusiasm. "The impact of improving margins on acquired systems has a muted impact across the entire company," wrote the firm, which initiated coverage of TWC with a ‘neutral’ rating. "We do not believe TWC’s premium valuation is warranted." The MSO may also find it hard to improve on its ’06 results, which saw 34% rev growth on stirring sub ads across video, HSD and phone. This year, it’s "all about execution," said pres/CEO Glenn Britt, who cited commercial phone and wireless roll outs and interactive advertising growth as the MSO’s hot-button issues in the near term. TWC will also complete this year a footprint-wide launch of digital simulcast capability and expects to have three-quarters of its systems switched digital-capable by the end of the year, said Hobbs.

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