TWX Time Warner Inc. New

By Joshua Jamerson and Keach Hagey 

Time Warner Inc. posted a double-digit revenue increase in the latest quarter, driven by growth at its Warner Bros. TV and film studio, as it looks to complete its planned tie-up with AT&T Inc.

Time Warner -- which operates the Turner cable networks, such as CNN; the prized HBO premium network; and the Warner Bros. film and TV studio -- said revenue increased in all three of the company's segments. The biggest jump came from the Warner Bros. division, the largest contributor to Time Warner's top line, which posted a 17% increase in revenue. The film studio was helped by the strong box office performance of J.K. Rowling's "Fantastic Beasts and Where to Find Them," as well as higher licensing revenues and increased production on the television side.

The company's fourth-quarter results topped Wall Street's expectations.

Time Warner agreed in late October to be bought by AT&T in a deal valued at roughly $85 billion. The tie-up would pair the carrier's millions of wireless and pay-television subscribers with Time Warner's deep media lineup, furthering AT&T's bet that television and video can drive growth in a stalled wireless market.

"The regulatory review process is under way and we remain confident that the deal will be approved later this year," Time Warner Chief Executive Jeff Bewkes said on an earnings call with analysts Wednesday. Time Warner shareholders will get to vote on the deal next week.

U.S. leaders from both major political parties -- including President Donald Trump -- have expressed hostility toward the deal. Randall Stephenson, chief executive of AT&T, met with Mr. Trump in the days before Mr. Trump was sworn into office but the company said its deal with Time Warner "was not a topic of discussion."

The company announced that HBO's over-the-top streaming service, HBO Now, had recently passed two million subscribers -- a number that impressed analysts. The service, which launched in April 2015, was the first in a wave of broadband-delivered television products targeting viewers who didn't want to pay for expensive pay-TV packages.

Meanwhile, however, HBO hasn't been having as much luck growing subscriber revenue in its traditional business. Time Warner reported that HBO and Cinemax domestic subscriptions were "essentially flat" for the year, though it said subscriber revenue growth would pick up in the latter half of next year as it cycles through a new round of distributor deals that give it a higher portion of the revenue from additional subscriptions to HBO.

HBO revenues increased 5.6% to $1.49 billion in the quarter due to a 5% increase in subscription revenues, largely due to higher domestic rates and international expansion. Operating income increased 9% to $429 million.

At Turner, revenues increased 6.7% to $2.84 billion, driven by a 14% increase in subscription revenues. Advertising revenue dropped 2% due to declines at Turner's international networks. In the U.S., advertising was flat due to lower ratings and difficult comparisons with sports performance in the previous year.

For the last three months of 2016, Time Warner reported net income of $293 million, or 37 cents a share, compared with $857 million, or $1.06 cents a share, in the year-ago period. Excluding items, the company earned $1.25 a share in the latest quarter.

Revenue rose 11% to $7.89 billion. Analysts polled by Thomson Reuters expected adjusted earnings of $1.19 a share on $7.72 billion in revenue.

Write to Joshua Jamerson at joshua.jamerson@wsj.com and Keach Hagey at keach.hagey@wsj.com

(END) Dow Jones Newswires

February 08, 2017 12:34 ET (17:34 GMT)

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