Subscriber Losses Grow but Election Ads Soar at Time Warner Cable

Company Recently Booked $1 Billion in Ad Sales in One Week

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Time Warner Cable, the second-largest U.S. cable-TV operator, reported third-quarter earnings that trailed estimates after losing more video subscribers than analysts projected.

A scene from an anti-Romney ad.
A scene from an anti-Romney ad.

Net income rose to $808 million, or $2.60 a share, from $356 million, or $1.08 a share, a year earlier, the New York-based company said today in a statement. Excluding one-time items, earnings per share were $1.41, missing the $1.43 average analyst estimate compiled by Bloomberg.

Time Warner Cable lost 140,000 residential video subscribers, more than the 128,000 that analysts had estimated -- and more than the 128,000 that Time Warner Cable lost in the third quarter of 2011.

Revenue rose 9.2% to $5.36 billion, missing the average estimate of $5.39 billion. Average revenue per user among TV customers was $74.32, hurt by a decline in video-on-demand orders. That missed the $76.49 estimate of James Ratcliffe, an analyst at Barclays.

The cable provider also added fewer internet and voice customers than analysts projected, a sign Time Warner Cable is struggling to market the correct bundles of services to its customers, said Paul Sweeney, an analyst at Bloomberg Industries.

"It's a sloppy quarter across the board operationally," Mr. Sweeney said. "Time Warner Cable has long promoted its ability to segment its subscribers. The results this quarter call into question that marketing strategy."

Ad revenue, on the other hand, soared as election season built toward a climax.

"In fact, just last week we had $1 billion in sales this year, which is a record for us," said President-Chief Operating Officer Robert Marcus during a conference call.

"We worked in recent weeks to maximize the political-advertising opportunities in battleground states like Ohio and Wisconsin by selling ad inventory that we normally use for internal marketing," he added. "Political demand won't last forever but I think we've made the most of it this year."

Campaign ads comprised half of the company's 22 % ad growth, but advertising still grew 12%, excluding political spending, driven partly by strong growth in automotive, Mr. Marcus said.

Time Warner Cable fell 3.4% to $94.81 at 9:36 a.m. in New York. The shares had gained 54% this year through yesterday.

Damage from Hurricane Sandy, which struck the East Coast last week, isn't expected to be significant to the company's fourth-quarter results, the company said in a filing. Time Warner Cable will credit customers for the time they lost service because of the storm, the company said Nov 2.

Time Warner Cable repurchased $500 million worth of shares in the period, falling short of the $850 million estimated by Craig Moffett, an analyst at Sanford C. Bernstein & Co. The light repurchases were disappointing to investors who anticipated more after Time Warner Cable received $1.1 billion from Verizon Wireless for its wireless spectrum, a deal approved by regulators in August, Mr. Moffett said.

~Bloomberg News~

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