TW 3Q: Cable Shines Bright, Phone Growth Slows
Time Warner’s solid 3Q results offered more positive news for cable Wed, with revenue for the cable division climbing 44%. Once again, the triple-play was extolled, with 9% of all Time Warner Cable customers subscribing to it in 3Q. “While we’re pleased so far, there is significant opportunity to improve on this success, particularly when you consider that we have yet to introduce phone into the old Adelphia systems,” CEO Dick Parsons said. Digital phone adds came in at 187K (11% penetration of homes served). It’s a hearty number, but there is some concern on the Street because it marks the 2nd straight quarter of decelerated growth for VoIP at the company. “The next 10 points of penetration above the 11% that we are now at are harder than the first 10 or 11 points,” said pres/COO Jeff Bewkes. He added that systems in the Carolinas have seen more aggressive marketing from the telcos lately but said TW is answering that. He categorically denied that the MSO has hit a ceiling on VoIP, pointing to systems where penetration has exceeded 20% (Albany, Syracuse, Binghamton, NY). Bewkes reiterated the phone possibilities for recently acquired Comcast and Adelphia systems. The potential upside of the acquired systems could manifest itself in the breakdown of sub metrics. TW Cable ended the Q with 570K RGU adds—583K adds from the historical systems offset by a 13K decrease from the acquired systems. Historical systems posted 1.4% Y-over-Y growth in basic subs, adding 33K. But the acquired systems lost 30K, resulting in a net increase of 3K. Net digital adds were 143K and net HSD gains were 251K (214K historically, marking the MSO’s 5th consecutive quarter of more than 200K net adds). Overall, Time Warner’s net income tripled to $2.3bln, while revenue rose 7% to $10.9bln. AOL appears to be on track for shifting from a subscription model to an ad-supported business. Revenue fell 3% as 2.5mln subs dropped their subscriptions, but ad revenue swelled 46%.