Bottom line lags as Time Warner Cable awaits merger

By Joe Musso


Although Time Warner Cable Inc. turned in underwhelming third-quarter earnings Thursday, a more fundamental problem continues to shadow the national cable provider’s prospects: the long wait for regulatory clearance of the company’s mega-merger with Comcast Corp. continues to drag on.

In the latest quarter, Time Warner’s net income fell 6.2 percent to $499 million or $1.76 per diluted share, from $532 million, or 1.84 per diluted share in the year ago period.

Adjusted earnings, which exclude extraordinary items, moved up to $1.86 a share from $1.69 a share a year ago but still fell four cents short of the $1.90 analysts had been expecting.

TWC’s revenues experienced a 3.6 percent boost to $5.71 billion from $5.52 billion a year ago.

“TWC has underperformed its large cable peers over the past couple of years, resulting in relatively weak revenue growth,” said Morningstar strategist Michael Hodel. Time Warner Cable, he said, “has made changes in pricing and promotion recently, with management admitting that it has made mistakes along the way.”

During the three months ended September 30, Time Warner Cable lost 184,000 residential video subscribers. It’s not alone: Over the last few fiscal years cable providers have been experiencing similar declines across the board, as consumers increasingly choose to replace their cable service with streaming services like Netflix and HBO’s planned stand-alone streaming site.

The less than stellar third quarter numbers are directly related to the falling number of American viewers paying for TV. This major change in the industry is also a driving force behind the imminent $45 billion, all stock merger with Comcast Crop.

“We’re fully engaged both in obtaining the government approvals necessary to close the Comcast deal and in planning proposed merger integration,” said Time Warner Cable Chairman and CEO Robert Marcus. “However, for most of our organization, the primary focus remains executing on our operating plan, so that we can deliver a very healthy Time Warner Cable to Comcast.”

The disappointing third quarter numbers had had little effect on TWC’s share price Thursday: in New York Stock Exchange trading, the company’s shares dropped 87 cents, less than one percent, to close at $142.88.