Time Warner Cable posts Q4 profit

Starts dividend; CEO says carriage talk process broken

NEW YORK -- Time Warner Cable on Thursday reported a fourth- quarter profit that exceeded expectations and initiated a much-anticipated quarterly dividend to reward shareholders.

But it also recorded more basic cable subscriber losses.

The second-largest cable operator in the U.S. said it will start paying a dividend of 40 cents per share in March.

Miller Tabak analyst David Joyce called that a "very meaningful" dividend yield of 3.7%, compared with Comcast's 2.4% and Cablevision's 1.6% yield.

"Over the past year, Time Warner Cable has emerged as investors' best hope for a pure-play cable operator with that long-awaited combination of high free cash flow and, better yet, a high payout ratio," commented Sanford C. Bernstein analyst Craig Moffett. "Today's earnings and announcements did not disappoint."

TWC's quarterly profit of $322 million compared with a loss of $8.16 billion in the year-ago period. Revenue rose 3% to $4.5 billion.

Total basic video subscribers in the fourth quarter declined by 105,000 to end the year at 12.86 million. That figure is "highly correlated to single-play customers," which declined by 146,000 to 6.2 million, said Joyce. "The benefits of bundled offerings -- creating "sticky" relationships with customers -- are obvious."

Also on Thursday, AT&T said its U-verse video service, which competes with cable TV, added 248,000 subscribers in the fourth quarter, down from 264,000 in the year-ago period, to reach a total of 2.1 million. It is up more than 1 million over the past year.

It was the company's fifth consecutive quarter of net user adds above 240,000.

AT&T's total video subscribers, which combine U-verse and bundled satellite TV customers, reached 4.2 million at the end of 2009.

On a conference call Thursday, TWC chairman and CEO Glenn Britt said he is not seeing a real economic rebound yet and called for a new way to handle network carriage negotiations.

"We have not seen a material improvement in the economic factors most relevant to our business, like housing, employment and consumer confidence," Britt told analysts.

Discussing recent carriage disputes, including one that TWC resolved at the beginning of the year with News Corp., Britt said the process is "clearly broken." He added: "We need to reform how these negotiations work. It's not working for consumers, which means it's not really working for the broader industry."

Asked who got the upper hand in the News Corp. deal, CFO Robert Marcus made a reference to a recent TWC campaign that put the spotlight on carriage talks conflicts with the slogan "Get Tough Or Roll Over."

"Whether we got tough or rolled over is somewhat in the eye of the beholder," Marcus said.
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