By Shalini Ramachandran And Michael Calia 

Time Warner Cable Inc., long considered a cable-industry laggard, reported its best residential-customer growth in several years in the fourth quarter, but higher costs tempered profits.

The company said it added 54,000 residential customers overall, compared with a loss of 85,000 in the year-earlier period. The cable operator added 168,000 high-speed data customers, compared with 39,000 a year earlier, while it increased voice customers by 295,000, compared with 1,000 last year.

Video customers declined by 38,000, a vast improvement from the 217,000 the company shed in the year-ago quarter.

The results are a stark turnaround for a company that became a takeover target in 2013, in part because it was posting poor operational results with regularity. Comcast Corp. ultimately struck a deal last year to acquire Time Warner Cable for $45 billion, a transaction regulators are reviewing.

Time Warner Cable said in a statement it was the best quarter of customer growth the company had experienced in "at least seven years." On a conference call with analysts, Chief Executive Rob Marcus praised the company's "terrific subscriber momentum." Despite growing competition from new online video entrants, Mr. Marcus even said he expected the company to add cable TV subscribers this year.

Time Warner Cable's success in luring subscribers in the quarter came partly from making installation free for customers who opted to buy all three products--voice, video and Internet. Residential triple-play customers increased by 273,000, compared with a decline of 6,000 last year.

The company also invested to modernize its video transmission to digital from analog, freeing up room on its cable pipes to boost Internet speeds in New York and Los Angeles, its biggest markets. Capital expenditures were up 28% to $4.1 billion for the full year.

Craig Moffett, analyst at MoffettNathanson, said Time Warner Cable's positive results Thursday show that the company could be valuable as a stand-alone entity. Part of Comcast's pitch to regulators has been that its superior technology and operations would improve Time Warner Cable customers' experience faster than Time Warner Cable could do on its own.

"If the Comcast deal breaks, TWC's shares will fall. But they may not fall as far as one might have expected," Mr. Moffett wrote in a research note.

The companies are pushing ahead with the deal. Chief Financial Officer Artie Minson said on the call that he continues to expect the Comcast merger to close early this year.

In a filing with the Securities and Exchange Commission on Thursday morning, Comcast and Time Warner Cable extended the "end date" of their merger agreement to Aug. 12, 2015. The earlier agreement said that if the deal hadn't been consummated by Feb. 12, the companies had the right to terminate it, subject to certain conditions.

Despite the subscriber gains, Time Warner Cable's results came in below Wall Street's expectations, as operating expenses ticked up. Programming costs grew 7.1% while customer-care costs increased 13.6%.

The company reported a fourth-quarter profit of $554 million, or $1.95 a share, up from $540 million, or $1.89 a share, in the year-earlier period. Revenue rose 3.8% to $5.79 billion.

Analysts had projected $2.08 a share in earnings and $5.81 billion in revenue, according to Thomson Reuters.

"It appears that management went for market share at the expense of near profitability," wrote Evercore ISI analyst Vijay Jayant in a Thursday research note.

Write to Shalini Ramachandran at shalini.ramachandran@wsj.com and Michael Calia at michael.calia@wsj.com

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