Time Warner plans to split off cable services

By Kenneth Li

NEW YORK (Reuters) - Time Warner Inc (TWX.N: Quote, Profile, Research) said on Wednesday it plans to fully separate its cable services division, responding to Wall Street's demands to refocus as a pure media content company to boost an ailing stock price.

Chief Executive Jeffrey Bewkes announced the decision in the company's first-quarter earnings report, which showed strength in advertising sales on cable television networks like CNN and TBS, offset by a sharp fall in AOL's revenue.

Investors have hoped that the media conglomerate, which owns about 84 percent of Time Warner Cable (TWC.N: Quote, Profile, Research), could shed more assets to restructure as a pure content company whose financials would be easier to forecast.

"We have now decided that, under the right circumstances, a complete structural separation is in the best interests of both Time Warner shareholders and Time Warner Cable shareholders," Chief Executive Jeffrey Bewkes said on a conference call with analysts, adding that he expected the two sides to reach an agreement on terms of the deal very soon.

Analysts said the move, widely expected by investors, could help attract more focused investors to Time Warner and Time Warner Cable, though the prospect of more shares on the market could temporarily cap gains.

"This is pretty much what we campaigned for a couple of years ago. I really think Bewkes is on the right track," said billionaire investor Carl Icahn, who had pressed Time Warner to spin off its cable division completely among other demands.

"It would have been better to do it a few years ago, but these things are never too late," he told Reuters in an interview.

Investors will focus on AOL as another target for divestiture, said Christopher Marangi, a portfolio manager at Gamco Investors Inc, which owns Time Warner shares.