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Time Warner Cable A Long Way from Ill-Starred AOL Merger

By    |   Thursday, 12 Jul 2012 05:44 PM

Time Warner Cable (TWC) has come a long way from the debacle that was its ill-starred merger with the old AOL (AOL). Back to its knitting, the company is on the M&A path, working to increase subscriber rates and revenue per customer with bundling offers while taking on new geographic service areas.

Time Warner Cable is among the largest providers of video, high-speed data and voice services in the United States, with cable systems located mainly in five geographic areas: New York State (including New York City), the Carolinas, Ohio, Southern California (including Los Angeles) and Texas.

As of Dec. 31, 2011, TWC served approximately 14.5 million customers who subscribed to one or more of its three primary services, totaling approximately 27.1 million primary service units.

TWC’s business services include networking and transport services, including cell tower backhaul services, and, through its wholly owned subsidiary NaviSite, managed and outsourced information technology solutions and cloud services. TWC also sells advertising to a variety of national, regional and local customers.

TWC markets its services separately and in “bundled” packages of multiple services and features. As of Dec.31, 60.4 percent of TWC’s customers subscribed to two or more of its primary services, including 26.5 percent of customers who subscribed to all three primary services.

On Aug. 15, 2011, TWC entered into an agreement with Insight Communications and a representative of its stockholders to acquire Insight and its subsidiaries, which operate cable systems in Kentucky, Indiana and Ohio that then served subscribers representing approximately 1.5 million primary service units. Insight reported revenues of approximately $1.1 billion for the year ended Dec. 31, 2010.

Separately, on Nov. 1, 2011, TWC completed its acquisition of certain NewWave Communications cable systems in Kentucky and western Tennessee for $259 million in cash. Additionally, during 2011, TWC completed two acquisitions of cable systems in Texas and Ohio serving subscribers representing a total of 26,000 primary service units for $38 million in cash.

Time Warner Cable has a market cap of $25.86 billion in a sector, media, where the average company size is $9.39 billion. Its trailing 12-month P/E ratio is 15.70 and its five-year projected price-to-earnings-growth (PEG) ratio is 0.99.

Its projected earnings per share growth for the coming year is 23.04 percent, compared to a sector average of 18.38 percent.

Momentum


Analysts are generally positive on TWC, with buy or outperform calls from Raymond James, Standard & Poor’s Equity Research, and Stifel Nicolaus.

“After what we saw as continued momentum through its first quarter results, TWC in late April offered more optimism on the Insight deal, which we expect to generate potentially significant economies of scale for the core residential business,” S&P analysts wrote in late April.

“Separately, we remain particularly sanguine on the nascent business services unit.We note ongoing wireless initiatives, including a selective Wi-Fi rollout, and early launch of a bundled wireless broadband offering via a resell pact with Verizon. We believe TWC has a strong balance sheet.”

Time Warner Cable next reports on Aug. 2.

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2012-44-12
Thursday, 12 Jul 2012 05:44 PM
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