Time Warner Cable has set the stage for cable results this week with lackluster results, which show too few additions. In total the company said that it added 175,000 RGU or revenue generating units but the key improvements need to be in digital voice, where it is stealing customers from RBOCs and in broadband additions, where it is also in a battle to prevent Verizon and AT&T taking a lead.
But the results were overshadowed by write downs, one in particular, a $14.8 billion write down (impairment) over the goodwill associated with getting its cable franchise rights. It makes sense that given the ease with which the RBOC rivals have managed to establish cable rights, and the changing regulations around them, that holding this as a value on its books is no longer wise.
Other impairments came from the company’s investment in Clearwire and a value of $375 million was written down.
This will serve to write most of the headlines about this report, but the real essence is in the customer numbers. Basic video customers decreased slightly to 13 million, digital subscribers were static, TWC added just 124,000 broadband lines and 130,000 digital domestic voice lines to 3.7 million. This represents a small slowdown in the TWC run rate for signing new voice customers from the rest of the year. There was a 39% increase year to year in the last quarter in the number of digital phone subscribers signed, this is more like a 13% rate.
What that tells us is that the incumbent telcos are getting better at holding onto voice customers, perhaps by pushing wireless voice as an alternative, or perhaps people are sticking with what they know during the recession.
In the last quarter, year to year broadband lines grew by around 13%, and the additions in the current quarter would imply something closer to 5% growth. Once again the incumbents are offering stronger triple and quad play options with faster broadband.
In revenue terms TWC was up 8% over the year to $17.2 billion and over the fourth quarter to $4.4 billion. Net loss due to those impairments was $7.3 billion for the year, and $8.2 billion for the quarter, but cash generated in the year was $5.3 billion, up 16%, and $1.43 billion for the last quarter, again up on last year.
Financially this might have been an okay quarter for TWC (apart from the impairments) but the long term indicators are definitively down we would say.
Elsewhere Germany’s Kabel Deutschland has had huge improvements for a cable company and says that combined, internet and voice lines were up 105% over this time last year from 636,000 to 1.24 million. Internet customers were 624,700, while phone customers numbered 616,000.
Total subscriber numbers hardly moved at around 9 million, with most of its progress coming because its networks are increasingly digital. It also added some 83,000 digital TV customers from analog.