Time Warner Cable Reports Best Second-Quarter Sub Trends in Years

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Time Warner Cable CEO Rob Marcus

UPDATED: Financials for the cable giant, which has agreed to be acquired by Comcast, fell below Wall Street expectations as SportsNet LA contributed to higher expenses.

Time Warner Cable on Thursday said it lost 152,000 residential pay TV subscribers in the second quarter, down from a loss of 191,000 in the year-ago period.

It said that was its best second-quarter overall subscriber performance in years.

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The company, whose $45 billion deal to be acquired by Comcast is being reviewed by regulators, ended the quarter with more than 11 million residential video subscribers.

TW Cable, led by CEO Rob Marcus, reported second-quarter earnings of $499 million, up 3.7 percent from $481 million in the year-ago period. Revenue rose 3.2 percent to $5.73 billion. The financials came in below Wall Street expectations.

Costs related to the planned Comcast deal amounted to $49 million in the quarter, made up of employee retention costs of $40 million and advisory and legal fees of $9 million.

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The company also stressed higher operating expenses due to "increased programming and content costs associated with SportsNet LA, a regional sports network carrying the Los Angeles Dodgers' baseball games and other sports programming." Third-party programming costs for TW Cable also rose in the second quarter.

"Time Warner Cable posted another very good quarter," Marcus said. "We delivered the best second-quarter subscriber volumes in years, accelerated [average revenue per user] growth and made terrific progress on our strategic and operating initiatives."

He added: "I want to commend our team for remaining laser-focused on executing our operating plan while at the same time working hard to complete our merger with Comcast."

Residential customer relationships saw a net decline of 34,000, marking the best second quarter in five years for TW Cable. Broadband subscriber net additions of 67,000 meant the best second quarter in four years. And the residential video user decline made the period the best second quarter in three years for TW Cable.

Los Angeles was in focus during the company's earnings conference call. The market was TW Cable's best performing region as far as video subscriber trends go in the latest quarter, Marcus said. But he cautioned about too much enthusiasm, saying, "I would hesitate to be too firm about" any connection with SportsNet LA.

With many big pay TV firms not having reached carriage deals for the sports network yet, TW Cable has agreed to binding arbitration with such companies as DirecTV and Charter Communications. But no other firm has agreed to join the process, and other details remain unclear so far. Said Marcus: "We've simply agreed to the concept of getting Dodgers games to fans as soon as possible. The actual process, the details of who would arbitrate and what elements of the contract would be arbitrated remains to be seen."

Email: Georg.Szalai@THR.com
Twitter: @georgszalai