By Michael Calia and Shalini Ramachandran
Time Warner Cable Inc. said its first-quarter profit jumped 19%
as the cable operator logged growth in high-speed Internet and
business services revenue, while reducing its rate of quarterly
video subscriber losses for the first time in two years.
The earnings result is the first since the number two cable
operator agreed to be bought by Comcast Corp., the biggest cable
operator, for $45 billion in stock, after spurning several offers
from smaller peer Charter Communications Inc. over the past year.
The Comcast deal has triggered regulatory debate and criticism from
other media companies, such as video streaming service Netflix
Inc., although Comcast has argued the merger would better enable it
to compete with the likes of Google Inc., Amazon.com Inc. and
Verizon Communications Inc.
On a conference call with analysts, Time Warner Cable Chief
Executive Rob Marcus said integration planning with Comcast is
going "better than expected" and TWC remains "very excited" about
the deal.
Addressing a recent drop in Comcast's stock price that has
reduced the value of its all-stock offer, Mr. Marcus said TWC
assesses value "on a long-term basis" as opposed to looking at
prices "at any given moment in time." He said he continues to
believe the Comcast deal is "the best way to maximize value for
shareholders," and that TWC shareholders will see benefits through
the Comcast stock they receive. "We don't get terribly hung up by
the fact that share prices move around from day to day," Mr. Marcus
said.
Mr. Marcus said TWC's management has "not taken our eye of the
ball as a result of the announcement," noting the company saw the
best subscriber results this quarter "in the last five years." A
big part of the reason TWC came under takeover pressure last year
was its laggard operating results compared with its rivals.
Time Warner Cable lost 34,000 residential video subscribers
during the first quarter compared with 119,000 a year ago, the
smallest such drop in five years, the company said. It gained
269,000 residential broadband subscribers compared with 131,000 a
year earlier--its most since the first quarter of 2008, according
to the company. Residential voice subscribers grew by 107,000,
compared with a loss of 35,000 a year ago.
However, total residential revenues declined about 1%, driven by
decreases in video and voice revenues. Video revenues dropped 6.6%
and voice revenues fell 4.4%, offsetting growth in broadband
revenues of nearly 11% on rate increases.
As a result, analysts remained cautious about the
turnaround.
Craig Moffett, analyst at MoffettNathanson LLC, said the better
subscriber results "weren't enough to offset this weakness" in
revenue metrics. Vijay Jayant, analyst at ISI Group LLC, suggested
TWC took in lower average revenues per user due to a "high degree
of bundling promotions" in the quarter that drove subscribers to
take cheaper packages. While the revenues could improve as TWC
rolls out rate increases next quarter, it could put pressure on the
subscriber momentum.
Business services revenue rose 24% to $668 million.
Overall, Time Warner Cable posted a profit of $479 million, or
$1.70 a share, up from $401 million, or $1.34 a share, a year
earlier. Excluding merger-related restructuring costs, per-share
earnings rose to $1.78 from $1.41.
Revenue rose 2% to $5.58 billion.
Analysts surveyed by Thomson Reuters had projected earnings of
$1.67 a share and revenue of $5.64 billion.
Write to Michael Calia at michael.calia@wsj.com and Shalini
Ramachandran at shalini.ramachandran@wsj.com
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