* Cuts annual revenue outlook
* Loses more than double the video customers than expected
* Executives say company open to consolidation
Oct 31 (Reuters) - Time Warner Cable Inc reported a steep decline in video and Internet customers, blaming a month-long blackout of No. 1 U.S. broadcaster CBS Corp and said it was open to consolidation if it would make money for shareholders.
Merger speculation boosted shares 2.2 percent and overshadowed third-quarter results which one analyst described as "horrible."
On his last conference call before he retires, Chief Executive Glenn Britt addressed deal talk that has been swirling in recent months. Britt said "we are focused on making money for you (shareholders), rather than just on some fuzzy notion of industry consolidation."
Sources have told Reuters that cable billionaire John Malone has approached Time Warner Cable about a full takeover through an investment in Charter Communications Inc, but has been rebuffed so far. Malone has also been talking up the need for consolidation in the cable industry whenever he gets a chance. Time Warner Cable management has rejected his overtures because they viewed a deal as not benefiting shareholders, Reuters has previously reported.
Britt said that he has witnessed mergers that were lopsided for one set of shareholders, such as Time Inc's merger with Warner Communications in 1990 and the disastrous AOL-Time Warner merger 13 years ago.
The cable operator turned in disappointing results on Thursday. It cut its full-year revenue growth forecast after posting third quarter revenue that missed analysts' estimates.
It said it lost 304,000 video customers on a net basis, almost double the losses Wall Street expected, according to research firm StreetAccount.
"This enhances Malone's appeal to Time Warner Cable shareholders that they would be better off with another management team," said Brean Capital analyst Todd Mitchell.
At the same time, it's possible Liberty Media - the holding company controlled by John Malone - and Charter will not want to pay for Time Warner Cable shares when its business is performing so poorly, said Craig Moffett, an analyst for MoffettNathanson Research.
Time Warner Cable, which also posted an unexpected decline in Internet customers in the third quarter, said it expected full-year revenue to grow 3 percent to 3.5 percent, down from its previous forecast of 4 percent to 5 percent.
In the third quarter, more high-speed Internet customers dumped their service than those who signed up for it. The company said it lost 24,000 residential Internet subscribers on a net basis while analysts were expecting an addition of 46,100.
Cable operators in the United States are increasingly depending on Internet customers for growth as they continue to lose cable TV subscribers to telecom and satellite companies and face rising programming costs.
CBS went dark on Time Warner Cable systems on Aug. 2 in New York, Los Angeles, Dallas and other cities as the two companies bickered over content carriage fees. The network returned when the two sides settled their differences on Sept. 2.
Credits issued to subscribers to compensate for the temporary blackout of CBS's Showtime channel cut Time Warner Cable's video revenue for the third quarter by about $15 million.
Net income attributable to Time Warner Cable dropped to $532 million, or $1.84 per share, in the third quarter ended Sept. 30 from $808 million, or $2.60 per share, a year earlier.
Excluding items, the company earned $1.69 per share.
Revenue rose about 3 percent to $5.52 billion.
Analysts on average had expected earnings of $1.65 per share on revenue of $5.54 billion, according to Thomson Reuters I/B/E/S.