Analysis: Time Warner Cable's missed chances began slide to takeover buzz

Thu Dec 19, 2013 7:44pm EST
 
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article | Single Page
[-] Text [+]

By Liana B. Baker and Ronald Grover

(Reuters) - By some measures, it seems hard to find fault with how Time Warner Cable has been run since it was spun off from its parent company, Time Warner Inc, in 2009.

Its stock price increased more than fivefold and it returned more than $9 billion to its shareholders in dividends and stock buybacks, on top of a $10.9 billion dividend at the time of the split.

But in the process of rewarding its investors, the nation's second-largest cable operator may have become one of the industry's weakest performers. Leichtman Research Group estimates that over the past two years, the company lagged rivals by losing nearly 10 percent of nearly 13 million video customers.

In New York's metropolitan area, its largest market, Time Warner Cable lost about 45 percent of its customers in New York's Staten Island and Bergen County in New Jersey to Verizon's video offering, according to MoffettNathanson research.

The result is the opportunity for cable billionaire John Malone to pursue a takeover, arguing new managers such as Charter Communications Chief Executive Tom Rutledge could do a better job running the company.

"They under-invested in their core video product and were super aggressive in capital returns which has done great things for their stock price but has left them in a poor competitive position," said Brean Capital analyst Todd Mitchell.

Malone, whose Liberty Media owns 27 percent-owned Charter Communications, the country's fourth largest cable operator, is expected to make a bid to buy Time Warner Cable in the coming weeks. Comcast, the nation's largest cable operator, is mulling a bid as well.

How did Time Warner Cable, one of the industry's best performers only a few years ago, fall so far so fast?   Continued...

 
A cable truck returns to a Time Warner Cable office in San Diego, California December 11, 2013. REUTERS/Mike Blake