Time Warner Cable Third-Quarter Profit Down 1%, Video Subs Continue to Fall

Glenn Britt
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Time Warner Cable CEO Glenn Britt's compensation grew 9% last year to $17.4 million. His base salary -- $1.25 million -- was the same as it was in 2002 and his compensation is roughly in line with CEOs at other such providers of TV services as DirecTV, Dish Network, AT&T, Cablevision and Comcast. Nearly half of Britt's compensation came by way of non-equity incentives, while stock and options amounted to $7.4 million. His compensation also included $186,000 for personal use of corporate-owned aircraft.

UPDATED: The second-largest U.S. cable operator says it lost 128,000 residential video subscribers as earnings season for big pay TV operator kicks into high gear.

NEW YORK – Time Warner Cable on Thursday reported a slight decline in its third-quarter profit that fell below Wall Street estimates and recorded a decline of 126,000 overall video subscribers.

A loss of 128,000 residential video subscribers brought the company's total residential video subscriber count to 11.94 million as of Sept. 30. But it added 2,000 video subscribers in its business services unit. In the year-ago period, the second- largest U.S. cable TV operator had recorded a decline of 155,000 video subs.

The firm added 89,000 residential broadband customers and lost 8,000 telephony subscribers in the third quarter - its first phone sub decline ever. TW Cable's total primary service units, which calculates the rise or decline in residential and business subscribers across video, broadband and telephony services, dropped by 16,000, compared with a year-go decrease of 17,000.

Analysts have predicted that the pay TV industry would lose fewer video subscribers in the third quarter than in the second quarter, which returned to negative momentum first seen in the second quarter of 2010.

TW Cable chairman and CEO Glenn Britt said: "We posted steady financial progress in the third quarter, powered by residential broadband and business services, and we’re pleased with the stronger subscriber results in August and September."

On a conference call, TW Cable management highlighted that quarterly video sub momentum improved year-over-year for the first time in almost two years, and the company actually gained video subs in September. Britt called pay TV "a very good but mature business," highlighting that "nearly everyone watches TV, and they watch a lot of it" and that cable provides convenience and more TV choice.

But management also reported a loss of DVR users, driven by a decline in digital video subs, and weaker premium channel business as revenue here declined by $12 million. Transactional VOD revenue fell by $7 million as events business was unchanged, while the adults and movies declined by similar amounts.

Analysts expressed some concern about the third-quarter sub momentum. "Continued residential video weakness that was greater than expected yet better than last year," said Miller Tabak analyst David Joyce. Wells Fargo analyst Marci Ryvicker called the overall subscriber unit decline disappointing, but said it was mainly driven by weaker-than-expected telephony results.

TW Cable shares closed down 7.7 percent at $65.21 in a stronger market. "While results are likely to weigh on the sector's stock price performance today, we would not extrapolate these results to Comcast," Ryvicker told investors in a report though. "Comcast is likely to once again show significant outperformance versus its peers" when it reports earnings next week, she said.

TW Cable reported third-quarter earnings of $356 million, down 1 percent compared with the $360 million recorded in the year-ago period amid higher costs and a 3 percent drop in advertising revenue.. Analysts had on average predicted a higher profit. Revenue rose 3.7 percent to $4.9 billion, slightly below Wall Street expectations.


Email: Georg.Szalai@thr.com

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