By Liana B. Baker
Jan 30 Time Warner Cable Inc, trying to
fend off a takeover bid, posted better-than-expected quarterly
results on Thursday and said it aims to increase the company's
sales while also investing more in its technology over the next
Shares rose $1.39 or 1 percent, to $133.49 per share.
"We are geared up to manage this company for the long haul,"
said CEO Rob Marcus, in his first conference call since he took
over on Jan. 1.
When asked about Charter's $132.50 rejected bid earlier in
January, Marcus reiterated that Time Warner Cable is only
interested in an offer above $160 per share, and would be
"willing to engage" if a deal drives more shareholder value than
the company can create on its own.
"We said the price it would take to transact would be $160
and this is specific to Charter, $100 in cash, $60 in Charter
stock," Marcus added.
The company, which is trying to convince investors it can do
a better job at operating its business than its suitor Charter
Communications Inc, unveiled a plan aimed at improving
the company's spotty customer service and investing more in its
Time Warner Cable said it would increase annual capital
expenditures to $3.7 billion to $3.8 billion over the next three
years, which should allow the company to improve its cable
systems, invest in infrastructure and replace older equipment.
Macquarie analyst Amy Yong said this capital investment is 5
to 10 percent above her own estimates and said it will help Time
Warner Cable speed up plans to upgrade its cable systems.
"Rather than smoothing this out over time, they're pulling
the spending forward and finishing up their digitization plan,"
Yong said, referring to Time Warner Cable's plan to convert its
systems to a digital signal.
The company expects to generate revenue of $25.7 billion,
and adjusted operating income before depreciation and
amortization of $9.4 billion, by 2016. These goals are
marginally above Street estimates, according to MoffettNathanson
Research analyst Craig Moffett.
Analysts liked Time Warner Cable's plan but cautioned it
would not be a quick turnaround.
"The strategy shift and the guidance is encouraging.
However, it will take some time for management to recover
investor confidence in their ability to execute," said New
Street Research analyst Jonathan Chaplin.
Moffett said, "the question that remains is whether any of
this is enough." He expects Charter to sweeten its bid above
$140 and receive some cash from Comcast after the deal
. Reuters has reported Comcast is interested in buying
some of Time Warner Cable's markets such as New York City.
Marcus also dismissed the notion that Time Warner Cable
lags Charter operationally. Charter's campaign for investor
support to its $37.3 billion bid has focused on how Charter
could run Time Warner Cable better under its CEO Tom Rutledge
(For more on Rutledge, see: )
Charter has been quick to point out that Time Warner Cable
suffers from one of the industry's poorest customer service
records, has lost subscribers at a higher rate than other large
operators, and lags in the roll out of new technology.
Time Warner Cable released a presentation showing how it has
higher margins than Charter and offers more products and a
better business services unit, which is the fastest growing area
in the cable industry right now.
A Charter spokesman did not immediately respond to a request
for comment on the presentation.
The company said revenue would rise 4 percent to 5 percent
this year, above the roughly 2 percent analysts are expecting,
according to Thomson Reuters I/B/E/S. Its free cash flow this
year will be flat at $2.5 billion.
The company said it lost 217,000 video subscribers in the
quarter, which was an improvement from the third quarter when it
lost more than 300,000 subscribers, but was worse than Wall
Street estimates of a loss of 206,200 subscribers.
Time Warner Cable's finance chief Arthur Minson said on the
call that some of Time Warner Cable's subscriber numbers in 2013
were "dismal" but said the company was now seeing some momentum
In the fourth quarter, the U.S. cable operator added 39,000
net residential Internet subscribers, a turnaround from a weak
third quarter when it lost 24,000 subscribers.
Net income attributable to Time Warner Cable rose 5 percent
to $540 million, or $1.89 per share, in the fourth quarter, from
$513 million, or $1.68 per share, a year earlier.
Revenue rose about 2 percent to $5.58 billion.
Analysts on average expected earnings of $1.73 per share on
revenue of $5.56 billion, according to Thomson Reuters I/B/E/S.