Time Warner Cable Profit Beats, Sees Q4 Slowdown

Time Warner Cable posted a higher-than-expected third-quarter profit, driven by phone and Internet sales, but said it had seen a significant slowdown in subscriber growth in the fourth quarter.

Mark Lennihan / AP

The No. 2 U.S. cable operator, which will be spun off from Time Warner as a stand-alone business in coming months, nudged down its full-year forecasts, citing weaker growth in video and phone services, especially premium services like pay-per-view video.

"If people continue to lose their homes and jobs, it would be naive to assume that there would be no impact on our business, and in fact, as we moved into the fourth quarter, we saw a significant slowdown in subscriber growth compared to last year, particularly for our video and voice services," Chief Executive Glenn Britt said on a conference call.

"In addition, we've experienced a slowdown in some of our premium video services, including pay per view, paid TV services and DVRs," he said.

Shares of Time Warner Cable fell 1.3 percent to $20.29 and remain down a third from their May high of $31.56.

Time Warner also posted higher-than-expected third-quarter profit, helped by strong advertising sales at its cable networks and the summer blockbuster movie "The Dark Knight."

Time Warner Cable said net profit rose to $301 million, or 31 cents a share, from $248 million, or 25 cents a share, a year earlier.

The latest results included $53 million in costs associated with its planned separation from Time Warner Inc. Excluding these costs, profit per share was 34 cents, beating analysts' average forecast of 28 cents, according to Reuters Estimates.

Revenue rose 8 percent to $4.3 billion, in line with Wall Street expectations.

Time Warner Cable added 214,000 high-speed Internet subscribers and 200,000 phone subscribers during the quarter.

Analysts at Bernstein Research had forecast additions of 167,000 Internet and 299,000 phone subscribers.

The New York-based cable operator, which is facing competition from phone companies like AT&T and Verizon Communications , lost 31,000 basic video subscribers during the quarter, but added 124,000 digital video subscribers.

Bernstein forecast basic video subscriber losses at 53,000 and additions of 175,000 digital video subscribers.

"As with Comcast, the results show the limited volatility of the cable business model, even in difficult consumer economic conditions," Barclays Capital analyst Vijay Jayant and James Ratcliffe wrote in an analyst report.

Time Warner Cable forecast 2008 revenue growth of about 8 percent, compared to its previous outlook of about 9 percent. It said full-year adjusted operating income before depreciation and amortization, or OIBDA, would also increase about 8 percent, compared with its previous forecast of percent to 11 percent.

(The media company reports better than expected Q3 earnings. Watch the accompanying video for more information on the company's spinoff plans.)

The new outlook was roughly in line with Wall Street expectations for full-year revenue growth of 8.2 percent and OIBDA growth of 8.4 percent.

In May, Time Warner , which owns 84 percent of Time Warner Cable , said it would spin off the cable unit and pay a one-time dividend of about $10.9 billion to both companies' shareholders.

The separation is expected to take place by the end of the year or in early January.

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