Time Warner loses subscribers, profits rise

Premium tiered services, high-speed data fuel earnings

Time Warner Cable, the nation’s No. 2 operator, reported Thursday that it lost 155,000 subscribers in the third quarter, fueling speculation that customers are cutting the cord to watch programming for free on the Internet.

Company’s video subscriber base dropped to 12.5 million in the period ended Sept. 30, with CEO Glenn Britt blaming the declines on high unemployment rates, housing vacancy and the lack of new housing starts. Chief operating officer Landel Hobbs added that TWC has seen no evidence of cord-cutting for “over the top” video services but that execs continue to monitor for that activity. Most of those giving up services were single-play customers and not bundled in with other services like broadband and phone.

News follows Comcast’s announcement last week that it lost 275,000 subscribers in the third quarter.Despite the subscriber declines, revenues from TV subscriptions at TWC rose 1.7% to $2.7 billion, as customers opted for more premium tiered services.

Just the same, execs announced they will soon be introducing a budget tier to lure new customers who are under duress in this tough economy, said Britt.

He offered few other details about the new lower-priced service other than to say he believes it would slow TV subscriber losses.

Overall, TWC’s revenues grew 5.2% to $4.7 billion, with big gains from services offered to businesses as well as from advertising. Net profits grew 34% to $360 million. Company has generated free cash flow of $1.6 billion so far this year.

Commercial revenue growth was driven by increases in business phone and high-speed data subscribers. The 22% gain in advertising revenue in the quarter came from spending increases in the automotive, media and political categories.

In a separate announcement Thursday, TWC unveiled an aggressive stock buyback plan — $4 billion — which at current share prices translates into repurchasing 20% of the company’s float, said chief financial officer Rob Marcus.

In talking about new services, Britt touted a DVR management option for smart phones that rolled out in New York City; ESPN offered for the first time in TV Everywhere service at TWC; and plans to let iPads serve as a remote control.

And he said that since TWC was fully spun out from Time Warner last year, execs considered changing the company’s name but decided ultimately to stick with Time Warner Cable because the brand “has value,” Britt said.

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