Time Warner Cable's stock added over seven and a half percent Thursday on higher subscriber numbers for all three of its services: home Internet, home phone, and digital cable. The company earned 60 cents a share, up from 48 cents in the year-earlier period.
In line with Comcast's upbeat results, Time Warner Cable reported a 19 percent increase in advertising revenue. Auto ads continue to roar on back, but that's not all —it appears the ad recovery is broad-reaching.
The company also benefited this quarter from higher prices—the average monthly video bill jumped 4.7 percent and the average Internet bill added 2 percent. And like Comcast, Time Warner Cable lowered its capital expenditures, helping grow free cash flow 78 percent.
Americans must feel like they get a great value from cable and Internet—they continue to add new services, though in smaller numbers than last year. The nation's second-largest cable company added 212,000 residential Internet subscribers, added 102,000 subscribers to the its pricier digital cable TV service, and added 86,000 home phone subscribers.
But Time Warner Cable lost a total of 42,000 video customers in the quarter: it does face steep competition and tough comparisons to last year when the company benefited from the transition from analog to digital TV.
The question now is whether the stock has had its run—the stock is up nearly 100 percent in the past 12 months, more than its bigger rival Comcast, which has borne the weight of uncertainty surrounding the NBC Universal Acquisition.
Standard & Poors analyst Tuna Amobi downgraded the stock to buy from strong buy, but he and many other analysts are still pretty bullish about the company. Sanford Bernstein's Craig Moffett says the company's strong cash flow gives it reason to return cash to shareholders-- we'll see if management agrees.
On the earnings call today CEO Glenn Britt addressed the controversial issue of "metered" pricing for Internet service: he said the company has no immediate plans to launch tiered pricing, but he left the door open. Last year the company's plans to introduce tiered pricing depending on how much Internet service consumers use incited anger and protest.
If the U.S. government mandates "net neutrality," i.e. giving equal broadband access to all websites, companies will have good reason to charge customers who use more bandwidth, more.
Tiered pricing is expected to emerge first in the wireless space, where capacity shortage could be an issue fairly soon. That's not a pressing issue for Time Warner Cable, but it, along with all other companies, will be watching carefully how wireless giants manage tiered pricing.
Comcast is buying a majority stake in NBC Universal, parent company of CNBC, from GE.
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