Time Warner Cable 3Q profit falls 11 percent

Time Warner Cable Inc., the nation's second biggest cable TV operator, said Thursday its profit fell 11 percent in the third quarter, weighed down by heftier interest expenses after piling on debt to separate from its parent, Time Warner Inc.

Revenue also grew at a slower pace in the quarter, as a weak housing market and the sluggish economy meant it was signing up fewer new subscribers while existing customers were not ordering as many premium services. When people move into a new home, they often sign up for cable service.

"Housing trends have not materially rebounded, with high foreclosure rates and home vacancy rates at their highest levels since at least 1966," CEO Glenn Britt said in a conference call with analysts. "Unemployment continues to increase, and of course we're also facing increased competition."

Time Warner Cable said it earned $268 million, or 76 cents per share, in the three months ended Sept. 30 compared with $301 million, or 92 cents a share, a year ago. Operating income rose by 5 percent to $828 million.

Revenue rose 3.7 percent to $4.5 billion from $4.34 billion a year earlier. Earnings were a penny a share shy of analysts' average estimate but revenue topped their forecast of $4.47 billion, according to Thomson Reuters.

Time Warner Cable's revenue growth slowed, up 3.6 percent in the quarter, down from 8.5 percent in the same quarter last year. It was a tad better than cable industry leader Comcast Corp., which reported earnings Wednesday, but not as good as Cablevision Systems Corp., whose Monday earnings report didn't show much sign of the sluggish economy's bite.

However, the cable TV industry as a whole is more resilient than other industries because while people might cut back on pay-per-view, they're reluctant to give up their TV. Also, cable's bundled video, Internet and phone service package usually is cheaper than buying the services a la carte.

Time Warner Cable also is a distracted by its net debt, up 75 percent to $22 billion at the end of the quarter after paying a $10.9 million special dividend to Time Warner Inc. and other shareholders in March. The company is trying to pay it back as quickly as possible.

The debt load affected free cash flow, a critical measure of liquidity for typically debt-laden cable companies. It rose by 19 percent to $1.5 billion in the first nine months of the year, compared with an increase of 64 percent last year, when net debt was $13 billion.

Standard & Poor's analyst Tuna Amobi said the company is on track to meet its near-term goals for lowering debt. But he was taken aback that the cable operator posted much slower growth than expected.

In the quarter, Time Warner Cable added 117,000 new lines of service encompassing video, Internet and phone services from the second quarter. The compares with the 522,000 it added sequentially in the third quarter of 2008. The cable operator serves 14.6 million customers.

The average monthly revenue per customer rose 4 percent to $102.48 encompassing video, phone and Internet.

Advertising revenue also remained soft, especially ad spending from auto despite the wildly popular "Cash for Clunkers" program.

Shares of Time Warner Cable, based in New York, rose 51 cents to $40.56 in afternoon trading.

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