Phone
Advertising sales probably will drop in the next two quarters, partly because of the recession, Chief Financial Officer Rob Marcus said today on a conference call. The New York-based company also is vying more with satellite-television operators and phone companies for customers, he said.
Subscriber trends in the current period will be similar to last quarters only with higher marketing and programming costs, which may hamper profit margins, Marcus said. Last quarter, Time Warner Cable added 204,000 net new customers for Internet, phone and digital TV, short of the 240,000 projected by Miller Tabak & Co. analyst David Joyce.
“Investors are disappointed that the net subscriber adds are down year-over-year, and it looks as though the third quarter is trending the same way,” said New York-based Joyce. “Theres still slow activity on housing sales and moves for families and competition is intensifying.”
Time Warner Cable, which trails only Comcast Corp. in cable subscribers, dropped 73 cents, or 2.2 percent, to $33.16 at 10:17 a.m. in New York Stock Exchange composite trading.
U.S. consumers have curbed spending to cope with the worst economic slump in at least half a century. Since the end of the third quarter last year, Time Warner Cable growth has slowed across all businesses, Chief Executive Officer Glenn Britt said.
Confidence Ebbs
U.S. consumer confidence fell more than forecast this month, reflecting a surge in unemployment that threatens to undermine household spending. Some economists surveyed by Bloomberg predict unemployment will top 10 percent in 2010, which may erode buying power and prompt Americans to save more.
The cable operator also faces escalating competition from phone companies such as Verizon Communications Inc., which is expanding its fiber-optic network that offers high-speed Web access and television. New York-based Verizon, the second- biggest U.S. phone carrier, gained 300,000 FiOS TV customers.
Time Warner Cable reiterated its forecast for 2009 earnings, excluding expenses such as restructuring costs, of $3 a share, matching the average of estimates compiled by Bloomberg.
Second-quarter net income climbed 14 percent to $316 million, or 89 cents a share, from $277 million, or 85 cents. That included 2 cents in costs for items such as reorganization. The company added 54,000 residential TV subscribers in the quarter, along with 103,000 for phone.
Free cash flow increased 28 percent to $1.03 billion in the first six months of the year, helped by lower spending on customer equipment like set-top boxes and decreased marketing and promotion offerings.