Time Warner Cable Loses Video Subscribers in Q4
While AT&T added 246,000 users to its U-verse video service, the cable company's management argued that the weak housing market and economy, rather than Netflix, continue to hurt its customer momentum.
NEW YORK - Time Warner Cable and AT&T on Thursday reported improved TV subscriber trends for the fourth quarter compared to the third, but customer momentum slowed from the year-ago period.
Analysts said the TW Cable video customer trends were also a bit weaker than Wall Street had expected on average. But TW Cable management during an earnings conference call on Thursday once again signaled that the company is not too concerned about the threat of cord cutting due to online alternatives, such as Netflix.
TW Cable's and AT&T's subscriber updates are among the first during fourth-quarter earnings season for TV distributors, which analysts expect will show a return of pay TV providers to video user growth after two straight quarters of subscriber declines.
TW Cable said it lost 141,000 video subscribers in the final quarter of 2010, fewer than the record 155,000 it had lost in the third quarter. But it had lost only 105,000 basic video customers in the same period a year earlier. Analysts had on average expected a subscriber decline of 120,000-125,000.
TW Cable COO Rob Marcus said the weak housing market and economy continue to have the biggest impact on subscriber momentum. “We are seeing some modest improvement, but we continue to feel the effects of a weak housing market and high unemployment," Marcus said.
And questioned about Netflix, CEO Glenn Britt echoed previous comments that its content is "fairly thin" by saying: "They have a wonderful interface,” but anyone who can hire Web designers could do the same, and Netflix and other Web-based services depend on thecable broadband infrastructure. “I question what the ultimate root value of that is. What's the value-add of what they're doing." Britt also wondered out loud if Netflix’s success will be sustainable.
Britt’s reference to the cable broadband infrastructure comes as analysts predict cable operators to go to usage-based broadband pricing, which they say could make up for some financial impact from subscriber losses.
In a move that drew applause from Wall Street, TW Cable on Thursday also raised its quarterly dividend by 20 percent to 48 cents per share. That and a 22 percent increase in fourth-quarter profitability to $1.3 billion helped the stock rise in early trading.
Meanwhile, AT&T reported that its U-verse video service added 246,000 net new subscribers in the fourth quarter, compared with 236,000 in the third and 248,000 in the year-ago period. That brought the total U-verse user base to nearly 3 million.