By Edmund Lee
Time Warner Cable Inc., the second-largest cable company, reported third-quarter profit Thursday that topped estimates as subscriber-rate increases helped make up for a shrinking pool of customers.
Net income fell 34 percent to $532 million, or $1.84 a share, in the three months ended in September, from $808 million, or $2.60, a year earlier, the New York company said in a news release. Excluding one-time costs, earnings per share were $1.69, surpassing the $1.64 average analyst estimate, according to data compiled by Bloomberg.
The third-largest division of Time Warner Cable is its Northeast Ohio/Western Pennsylvania unit, based in Akron.
Revenue from residential high-speed Internet subscribers rose 14 percent in the period to $1.46 billion from a year earlier, even as those customers declined in number. Time Warner Cable also dropped 306,000 video subscribers, as the broader cable industry continues to face increased competition from newer video providers such as AT&T Inc. and streaming services such as Netflix Inc.
While profit topped estimates, the company lost residential subscribers at all its business lines, including 24,000 broadband customers — the first time it had lost numbers in that once-booming category. The company increased profit by raising the average monthly bill paid by customers.
The subscriber exodus may strengthen the effort by billionaire investor John Malone to combine Time Warner with Charter Communications Inc., according to Craig Moffett, founder of research firm MoffettNathanson LLC.
“These results are so bad that it makes it extraordinarily difficult for the Time Warner Cable board to continue to resist Charter’s overtures,” he said in an interview following the report.
Malone’s holding company, Liberty Media Corp., is the largest shareholder in Charter. After acquiring a 27 percent stake in the Stamford, Conn.-based cable company, Malone said he wanted Charter to be “a horizontal acquisition machine.”
Time Warner Cable shares have gained about 20 percent this year.
Malone’s overtures to Time Warner Cable are part of a broader push for industry consolidation. Pay-TV companies are having to pay more to carry programming from the major cable and broadcast networks, and Malone has said that bulking up would help extract better terms.
Time Warner Cable recently agreed to pay a significant increase for the right to carry CBS programming, ending a dispute that caused a monthlong blackout in the quarter. Time Warner Cable sales gained 2.9 percent last quarter to $5.52 billion, just short of the $5.54 billion average estimate.
Earlier this week, Time Warner Cable Chief Executive Officer Glenn Britt, who said in July that he will retire at year’s end, told employees that he has cancer.
The succession plan will pass CEO and chairman roles to Chief Operating Officer Rob Marcus on Jan. 1.