Time Warn(ing)

Time Warner Cable endured a tumultuous Oct and accordingly cut its full-year outlook for both revenue and adjusted OIBTA. During a Wed earnings call, pres/CEO Glenn Britt noted a "significant slowdown in sub growth" into 4Q, primarily for video services such as PPV, DVR and phone services due to cord-cutting. Plus, "all advertising sectors for us are very weak," added CFO Robert Marcus, who intimated that a 10% decline in 4Q RGU net adds wouldn’t be a surprise. Execs, however, did highlight a few bright spots: the MSO is seeing both fewer connections and greater disconnects, suggesting the economy is far more to blame for the slowdown than is competition; and the company remains strong overall. Time Warner Cable’s plans to split from parent Time Warner early next year and to invest in the Sprint/Clearwire jv are still a go, said execs, with funding for the former transaction’s hefty dividend payout (approx $10.9bln) already set. For his part, Sanford Bernstein analyst Craig Moffett isn’t concerned about the MSO’s guidance trim or its future. "TWC’s sustained growth and share gains bode well," wrote Moffett, "and the fact that consensus expectations will now actually need to come up to meet TWC’s lowered guidance makes a further case for the glass (more than) half full." Furthermore, said Moffett, the cable op’s better-than-expected results in basic losses and broadband adds "suggest that the telco impact on cable is being more than fully offset by the deteriorating fortune of the satellite operators." Moffett forecasts a 20% decline in DirecTV‘s 3Q sub growth. Collins Stewart‘s Thomas Eagan lowered his 4Q VoIP add estimates for TWC by 44K and increased expected basic losses by 10K. Meanwhile, Time Warner, which cut its full-year earnings per share estimates primarily due to restructuring charges, remains bullish on its cable nets. Turner grew ad rev 9% in 3Q, said CFO John Martin, who expects solid ad growth in 4Q as well. "The benefits of this year’s strong upfronts are kicking in this quarter, cancellation rates are running at normal levels, and while the current scatter market is moving cautiously, it still is running moderately ahead of upfront pricing," he said. Time Warner’s subscription rev rose 10%, owing to solid affil growth at Turner and HBO, and sub growth at Turner, which achieved its 6th straight Q of double-digit growth in sub rev. TWC shares dipped 3.2% Wed, TW’s 6.3%.