Time Warner Cable loses subscribers, says open to deals

Reuters

* Cuts annual revenue outlook

* Loses more than double the video customers than expected

* Executives say company open to consolidation

By Liana B. Baker

Oct 31 (Reuters) - Time Warner Cable Inc reported asteep decline in video and Internet customers, blaming amonth-long blackout of No. 1 U.S. broadcaster CBS Corp and said it was open to consolidation if it would make money forshareholders.

Merger speculation boosted shares 2.2 percent andovershadowed third-quarter results which one analyst describedas "horrible."

On his last conference call before he retires, ChiefExecutive Glenn Britt addressed deal talk that has been swirlingin recent months. Britt said "we are focused on making money foryou (shareholders), rather than just on some fuzzy notion ofindustry consolidation."

Sources have told Reuters that cable billionaire John Malonehas approached Time Warner Cable about a full takeover throughan investment in Charter Communications Inc, but hasbeen rebuffed so far. Malone has also been talking up the needfor consolidation in the cable industry whenever he gets achance. Time Warner Cable management has rejected his overturesbecause they viewed a deal as not benefiting shareholders,Reuters has previously reported.

Britt said that he has witnessed mergers that were lopsidedfor one set of shareholders, such as Time Inc's merger withWarner Communications in 1990 and the disastrous AOL-Time Warnermerger 13 years ago.

The cable operator turned in disappointing results onThursday. It cut its full-year revenue growth forecast afterposting third quarter revenue that missed analysts' estimates.

It said it lost 304,000 video customers on a net basis,almost double the losses Wall Street expected, according toresearch firm StreetAccount.

"This enhances Malone's appeal to Time Warner Cableshareholders that they would be better off with anothermanagement team," said Brean Capital analyst Todd Mitchell.

At the same time, it's possible Liberty Media - theholding company controlled by John Malone - and Charter will notwant to pay for Time Warner Cable shares when its business isperforming so poorly, said Craig Moffett, an analyst forMoffettNathanson Research.

Time Warner Cable, which also posted an unexpected declinein Internet customers in the third quarter, said it expectedfull-year revenue to grow 3 percent to 3.5 percent, down fromits previous forecast of 4 percent to 5 percent.

In the third quarter, more high-speed Internet customersdumped their service than those who signed up for it. Thecompany said it lost 24,000 residential Internet subscribers ona net basis while analysts were expecting an addition of 46,100.

Cable operators in the United States are increasinglydepending on Internet customers for growth as they continue tolose cable TV subscribers to telecom and satellite companies andface rising programming costs.

CBS went dark on Time Warner Cable systems on Aug. 2 in NewYork, Los Angeles, Dallas and other cities as the two companiesbickered over content carriage fees. The network returned whenthe two sides settled their differences on Sept. 2.

Credits issued to subscribers to compensate for thetemporary blackout of CBS's Showtime channel cut Time WarnerCable's video revenue for the third quarter by about $15million.

Net income attributable to Time Warner Cable dropped to $532million, or $1.84 per share, in the third quarter ended Sept. 30from $808 million, or $2.60 per share, a year earlier.

Excluding items, the company earned $1.69 per share.

Revenue rose about 3 percent to $5.52 billion.

Analysts on average had expected earnings of $1.65 per shareon revenue of $5.54 billion, according to Thomson ReutersI/B/E/S.

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