TWC Subscriber Fees Gain on Broadband Growth

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After being stable for the past few years, Time Warner Cable's ( TWC ) broadband ARPU is beginning to pick up driven by greater demand for the company's high speed internet offering.However, growth in fee per subscriber won't be very significant due to a competitive pricing environment with cable players like Comcast ( CMCSA ) and telecom players like AT&T ( T ) and Verizon ( VZ ) that are trying to increase their broadband subscriber share.

Trefis members predict TWC's monthly fee per broadband subscriber will rise to $50 by 2017, higher than the Trefis estimate of $47. The members' projection corresponds to upside of around 14% to our price estimate for TWC stock.

We currently have a Trefis price estimate of $55.46 for Time Warner Cable's stock , about 14% below the current market price.

Higher Speed, Higher Priced Packages Will Drive ARPU…

TWC offers broadband packages with higher speeds and higher prices. Some of these offerings include Turbo, Docsis and Road Runner. In its Q3 2010 earnings, the company reported that 13% of high-speed data subscribers either take Turbo or Docsis 3.0 offering. (See related article: Time Warner Cable's ARPU Rising on Broadband .) We believe that as the economy improves, customers are likely to upgrade to higher-priced packages, thereby boosting the average subscription fee.

…. But Competitive Pricing and Growing Multiple-Play Customers A Concern

More than half of TWC's digital subscribers use double-play packages (Internet, TV), and around one-third subscribe to triple-play (Voice, Internet, TV). Such bundled services are lower priced compared to individual packages. This benefits customers but at the same time adds pressure on ARPU.

In addition, the competition in broadband market is as fierce as cable, telecom and satellite players are all vying to get a share of the existing subscriber base, which is quickly getting saturated.

Member Forecast

The Trefis community predicts that TWC's monthly fee per broadband subscriber will increase from $48 in 2010 to north of $55 by 2016, compared to the baseline Trefis estimate of an increase from $43 to $48 during the same period. The member estimates imply an upside of 14% to the Trefis price estimate for Time Warner Cable's stock.

Our complete analysis for Time Warner Cable's stock is here .



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Investing Ideas , Stocks , US Markets

Referenced Stocks: CMCSA , DTV , T , TWC , VZ

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