Time Warner Cable shifts away from "triple play"

Thu Apr 25, 2013 6:24pm EDT

The Time Warner Cable office is shown in Carlsbad, California November 5, 2012. REUTERS/Mike Blake

The Time Warner Cable office is shown in Carlsbad, California November 5, 2012.

Credit: Reuters/Mike Blake

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(Reuters) - Time Warner Cable Inc, the second-largest U.S. cable provider, will no longer aggressively push "triple play" packages of Internet, video and voice on its customers, moving away from the long-held industry practice of bundling the services together.

Time Warner Cable is the first cable company in the U.S. to acknowledge that customers would prefer to only pay for television and Internet, as demand for landline service has been declining steadily with many people only using cellphones, even at home.

The company lost 35,000 voice subscribers in the first quarter, missing analysts' estimates of a gain of 76,000 subscribers. Overall revenue for the quarter also came in just slightly short of expectations.

Getting customers hooked on all three services will no longer be a priority when potential customers call to ask about subscribing, Chief Operating Officer Rob Marcus said.

Instead, representatives will probe customers to find out what services they actually use and then "upsell" premium offerings such as faster Internet or premium television channels based on customer's interests.

"We were almost exclusively about the 'triple play' previously," he said in an interview on Thursday.

The cable industry faces a challenge from customers who consume an increasing amount of Internet video and subscribe to lower cost alternatives such as Netflix. Time Warner Cable issued earnings on Thursday that showed it lost a worse-than-expected 119,000 video customers in the first quarter.

The new strategy, which was rolled out in the first quarter, resulted in more customers signing up for single or double play packages than triple play packages. The company lost 35,000 net triple play subscribers in the quarter compared to a year ago.

Part of the rationale for the change is that customers will spend more when they feel they are using all their services, Marcus said.

Customers who want a "triple play" package with voice can still buy one and those bundles will continue to be a part of Time Warner Cable's marketing.

Marcus said it would take time for the new pricing and packaging to deliver results but said that, so far, new customers were spending more than a year ago. Average revenue per subscriber was $104.84, up by $1.27 from the fourth quarter of last year.

ISI Group cable analyst Vijay Jayant said Time Warner Cable was right to shift away from what has been a flagship offering for the industry since at least 2005, because consumer tastes are changing.

"In this environment, who really wants to pay for a wireline phone service?" Jayant said.

Time Warner Cable added only 143,000 high-speed data subscribers in the first quarter, fewer than the 181,000 subscriber additions that analysts had expected, according to StreetAccount.

Time Warner Cable and its larger rival, Comcast Corp, have increasingly relied on Internet customers for growth as they continue to lose cable TV subscribers and grapple with rising programming costs. Comcast declined to comment on whether it would consider moving away from a 'triple play' strategy.

Net income attributable to Time Warner Cable rose to $401 million, or $1.34 per share, in the first quarter, from $382 million, or $1.20 per share, a year earlier.

Excluding items, the company earned $1.41 per share, which beat analysts' average estimate of $1.37 per share.

Revenue rose about 6.6 percent to $5.48 billion, short of analyst estimates of $5.49 billion.

The company said it cut 500 jobs in marketing, finance and human resources in the first quarter.

Shares of Time Warner Cable closed down 0.6 percent to $92.19 on the NYSE on Thursday.

(Reporting by Liana B. Baker; Additional reporting by Aurindom Mukherjee in Bangalore; Editing by Saumyadeb Chakrabarty, Tim Dobbyn and Phil Berlowitz)

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