Time Warner Cable (TWC) makes coaxial quiver. The company is the #2 US cable company, after Comcast, with operations in 28 states. Its core service areas are located in New York, Ohio, Texas, the Carolinas, and southern California. TWC serves mostly residential customers, more than 12.5 million of which are video subscribers, about 10.5 million high-speed data customers, primarily through ISP brand Road Runner, and about 4.8 million use its VoIP digital phone service in conjunction with Sprint Nextel. TWC also provides mobile broadband service through a wholesale deal with Clearwire, and it operates local news broadcasting stations in New York, Texas, and North Carolina, as well as regional sports networks.
Financial Analysis
TWC's core residential video subscriber base continued to shrink in 2011, dropping 3%. Also eating into its residential revenue was a nearly 5% drop in premium channel subscriptions and a 7% fall in pay-per-view purchases. TWC's video revenue eked out a nominal increase, lifted by cable package price increases and customer upgrades to higher service tiers moved the average monthly revenues per subscriber up by 4%. Also, growing DVR service sales (up about 10%) and equipment rental and installation (up nearly 6%) kicked in to keep residential video revenue from dipping. High-speed data services helped pick up the slack, with that customer base growing more than 5% for the year, with revenues up about 10%, helping spur TWC's more than 4% overall revenue growth.
Mergers and Acquisitions
Acquisitions have played their part in keeping TWC in the mix. In 2011 it paid about $260 million in cash for some of Missouri-based NewWave Communications' cable business, comprising service areas in Kentucky and western Tennessee. The deal expanded TWC's residential subscriber base by 70, 000 basic video accounts, 42, 000 broadband customers, and 26, 000 phone accounts. The following year TWC grabbed a hefty three-quarters of a million subscribers with the $3 billion purchase of Insight Communications, which provides high-speed data, video, and voice services to more than 760, 000 subscribers in Indiana, Kentucky, and Ohio. That customer base included a welcome 670, 000 video subscribers, helping it back to the 12 million-plus mark for that metric and generating a more than 2% increase over its video subscriber total from 2010.
With the Insight acquisition, TWC's total subscriber base climbed to about 15.3 million, with about 60% using at least two of its services, and more than a quarter subscribed to all three. As its video subscriber base comes under increasingly intense pressure from services such as Netflix and Hulu, TWC continues to rely on its high-speed data services to keep its top line growing.
That reality has led TWC to take steps to be more appealing to commercial clients, which currently only number in the high triple digits for all services combined. The company increasingly markets digital phone service to small- and medium-sized businesses in many of its service areas, and TWC is also looking to boost sales of its broadband Internet and advertising services for businesses. Bundling its services into packages that encourage customers to upgrade or add services is a key component of its strategy for growth.
