Time Warner Cable Beats Estimates as Client Losses Slow

Time Warner Cable Inc. slowed subscriber losses at its TV business last quarter, making Comcast Corp.’s proposed $45 billion takeover look like a smarter bet.

First-quarter earnings, excluding some items, rose 26 percent to $1.78 a share, the New York-based company said today in a statement. That topped the average estimate from analysts of $1.67 as Time Warner Cable added 148,000 net residential customers for its Internet, voice and TV service -- the most in more than seven years.

The company lost only 34,000 residential TV customers, better than the drop of 217,000 in the prior quarter, as Chief Executive Officer Rob Marcus offered more flexible viewing options such as on tablets and third-party set-top boxes. Comcast may be able to help that trend even more after surprising analysts this week with an increase in video subscribers last quarter with its X1 set-top box and promotions.

“By the time we close the deal with Comcast, Time Warner Cable will be in the best shape ever,” Marcus said on a conference call today.

Analysts had estimated a much higher loss in video subscribers, about 77,000 on average, according to Craig Moffett, founder of research firm MoffettNathanson LLC.

Keeping Customers

Marcus said the company retained more customers in the quarter by offering better rates to reduce defections to competing services such as Verizon Communications Inc.’s FiOS TV.

He also reiterated his plan to add 1 million residential customers over the next three years.

The company has been operating in an increasingly tough environment as consumers sign up for streaming TV services such as Netflix Inc., which cost much less than cable. Last year, the number of Americans paying for television fell for the first time, dropping by 251,000 customers to about 100 million, according to research firm SNL Kagan.

Time Warner Cable’s net income rose to $479 million, or $1.70 a share, up from $401 million, or $1.34, a year earlier. Sales of $5.58 billion compared with the average projection of $5.64 billion.

The shares rose 0.4 percent to $140.40 today.

While it still lost TV subscribers in the quarter, it was the smallest drop in five years. At the same time, 269,000 more people signed up for broadband, the most since 2008, bringing total residential Internet subscribers to 11.4 million.

Comcast, Charter

This week, Comcast and Charter Communications Inc. neared a deal for divested subscribers that may help appease critics before regulators make a decision on the acquisition. Charter had originally attempted to work with Comcast to carve up Time Warner Cable earlier this year.

Charter is now nearing a deal to acquire about 1.5 million subscribers from Comcast and a 40 percent equity stake in a newly formed company with another 2.5 million customers, people familiar with the situation said this week. Comcast has already said it plans to divest about 3 million subscribers as part of its acquisition of Time Warner Cable, and the agreement is contingent on that deal closing.

Marcus, who became Time Warner Cable’s CEO in January, stands to benefit from the merger with a hefty payout. Once Comcast completes its acquisition, Marcus is set to receive a severance payment of $79.9 million in cash, equity and benefits.

Higher Bills

To help boost sales, the company is charging subscribers more. A residential customer’s average monthly bill rose 0.6 percent to $105.45 last quarter. That helped to offset a 10 percent jump in average monthly costs for video programming.

Comcast and Time Warner Cable have argued that their combination could help reduce programming costs by giving them more heft in negotiations with content providers.

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