TWC Gains, but Lowers Expectations
Time Warner Cable last week reported a revenue increase to $4.3 billion in the third quarter, which represented an 8 percent jump compared to the same quarter in 2007. The gain was attributed to digital video, digital phone and broadband subscriber gains.
"Our communications and entertainment services continue to be a vital part of consumers’ lives, as evidenced this quarter by growth in bundled services and customer relationships," said Time Warner Cable President and CEO Glenn Britt. "In particular, we generated very strong high-speed data net additions that far outpaced the telcos’ broadband additions."
Time Warner added 124,000 digital video subscribers, 200,000 residential digital phone subscribers, and 214,000 residential high-speed data subscribers since the second quarter. At the same time, the company saw another drop in basic cable subscribers, losing 31,000 from the previous quarter, continuing a downward trend in this category.
Lower expectations Looking at overall comparative numbers and the general state of the economy, Time Warner Cable lowered its revenue expectations for 2008. It now anticipates growth in revenue and operating income to be 8 percent each from 2007 bases of $15.955 billion and $5.742 billion. However, the earnings per share target of $1.10 to $1.15 was reaffirmed.
Britt attributed the change in forecast, in part, to a "significant slowdown in subscriber growth compared to last year," and noted it would be "naive to assume there would be no impact to our business," given an "unprecedented" slowdown in the global economy, according to the Associated Press. Bully for broadband Internet
Even still, analysts were generally encouraged by broadband Internet numbers in the cable realm, calling the market "quite resilient" thus far.
"Despite a troubling economic environment, increased unemployment and historically low consumer confidence levels, broadband customers are not disconnecting en masse," said John Lee, analyst, Strategy Analytics Multiplay Market Dynamics Service.
The firm also noted that cable companies are winning broadband customers away from DSL providers. Comcast added 382,000 net new subscribers in the third quarter compared to 149,000 and 129,000 new subscribers reported by AT&T and Verizon, respectively.
"Telcos are not adequately keeping up with the huge demand for fiber, and impatient consumers are making the switch from DSL to cable," said Ben Piper, director of Strategic Analytics Multiplay Market Dynamics Service. DirecTV quadruples cash flow Meanwhile, on the satellite front, DirecTV Group posted third quarter revenues of nearly $5 billion, which represented a 15 percent increase compared to the year-ago quarter.
Cash flow before interest and taxes nearly doubled to $619 million, and free cash flow quadrupled to $332 million compared to the third quarter of 2007. The company attributed this to a higher OPBDA (operating group profit before depreciation and amortization) and a 31 percent decrease in capital expenditures thanks, in part, to lower set-top box costs.
– Monta Monaco Hernon
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