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
Access Investor Kit for Comcast Corp.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US20030N1019
Access Investor Kit for Comcast Corp.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US20030N2009
Access Investor Kit for Time Warner Cable, Inc.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US88732J2078
Subscribe to WSJ: http://online.wsj.com?mod=djnwires