Time Warner Cable suffered the same fate Comcast did last week: basic sub losses and lagging HSD numbers disappointed Wall St, sending shares down 3.8% to $36.78 at close. Execs said typical seasonality, as well as the slumping housing market and overall competition, influenced 2Q results. Time Warner lost 57K basic subs (38K in acquired systems, and more alarmingly, 19K in legacy systems). “This is frankly a little disappointing,” said evp, CFO John Martin. He noted that it has been some time since the MSO lost subs in those legacy systems, reminding investors that TW’s legacy systems have seen sub gains in 8 of the last 10 quarters. The MSO’s strategy going forward is to create bundles that appeal to more price sensitive consumers. To that end, it’s introducing a local-only VoIP option, as well as an in-state only calling plan. It’s also creating 4 standard tiers of HSD service across all divisions—Lite (768kbps downstream), Basic (1.5mbps), Standard (7-10mbps) and Turbo (10mbps or faster). COO Landel Hobbs declined to give a price point on the lower-end bundles but said the key would be to upsell subs on the original offer. He added that existing subs’ migration to the Turbo service has been strong enough to help mitigate the customers taking Lite or Basic HSD service. The local-only calling plan, aimed at the 15% of customers who don’t make long-distance calls, has already rolled out in a few divisions, and TW has launched its unlimited in-state calling available to 2/3 of its divisions. TW Cable beat analyst expectations for profit and revenue. Net profit for the Q fell to $272mln from $292mln a year earlier, while revenue jumped to $4.01bln from $2.52bln, helped by last year’s Adelphia/Comcast acquisitions. The MSO added 188K HSD subs and 184K digital. Digital phone adds totaled 241K, making it the Q’s fastest growing service. Sanford Bernstein’s Craig Moffett called the results “somewhat disappointing” but reiterated his view that TW Cable is markedly undervalued. Also Notable: TW acknowledged that it’s bidding on Insight, saying it was using discipline to evaluate the opportunity. It offered no further details. The MSO also said that Sprint has pulled out of SpectrumCo, the jv it created with cable to purchase spectrum in the FCC’s AWS auction last year. Sprint owned a 5% interest in the jv. The dissolution of the deal has no implications on the Pivot wireless jv with Sprint, CEO Glenn Britt said. Sprint called the action “long- planned” and said it “does not reflect a change in strategy or focus for Sprint Nextel or its cable partners.”

The Daily



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