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Time Warner Cable CFO sees tougher 2009
Mon Dec 1, 2008 7:09pm EST
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By Yinka Adegoke
NEW YORK (Reuters) - Time Warner Cable Inc will likely sell fewer than expected video, Internet and phone subscriptions this year, and expects a further decline next year due to the worsening U.S. economy, Chief Financial Officer Rob Marcus said on Monday.
"In 2008, we're on track to deliver less than 2.5 million additional revenue-generating units," Marcus told the Reuters Media Summit in New York, adding that that was less than what the No. 2 U.S. cable company had originally anticipated.
Revenue-generating unit, or RGU, is a cable industry term used for each video, Internet and phone subscription sold. Time Warner has sold around 2.1 million RGUs in the first three quarters of 2008, implying that it expects to add 400,000 RGUs in the fourth quarter.
Analyst Thomas Eagan of Collins Stewart said he had forecast Time Warner Cable to sell 2.6 million RGUs in 2008.
"We pulled back our numbers after the third quarter but maybe we didn't pull them back enough," Eagan said. "It appears the dramatic slowdown they saw last month hasn't really abated."
Time Warner Cable said on its third-quarter earnings call last month that it saw a slowdown in customers signing up for premium services, such as digital video recorders and pay-per-view TV.
Marcus said the company will likely sell fewer services overall next year, after new subscriptions growth already slowed markedly in September when investment bank Lehman Brothers collapsed and the financial crisis steepened.
"I would say coming in 2009 ... it's going to be less than that (2.5 million), though I have no doubt it will be a significant number," he added.
The executive said that it had become extremely difficult to forecast the rate of growth next year due to the economic downturn. "I don't think anything we've seen before is instructive of what we're seeing right now," he said.
Cable companies are traditionally viewed as resilient to a downturn as Americans are not expected to drop their video subscriptions even if they spend less money on going out to theaters and restaurants.
Time Warner Cable is currently going through a separation from its parent Time Warner Inc and has raised more than $9 billion in the corporate bond market toward paying a one-time dividend to existing shareholders.
Marcus said it will focus on spending its free cash flow on paying back the debt over the next two years to return its leverage ratio to its preferred level of around 3.25 rather than making major acquisitions in 2009.
"You shouldn't expect us to be very aggressive on the M&A front," he said.
The two companies had originally said their separation would be completed by the end of the year but the process has dragged on, caught up with U.S. regulators. Continued...
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