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Broadband is the Name of The Game for Time Warner Cable

Time Warner Cable ( TWC ) reported its Q2 earnings yesterday. The company's video subscriber losses were higher than expected, and unlike Q1, broadband and digital voice subscriber gains could not compensate for video losses. The weakness in subscriber additions is partly due to seasonality as well as higher competition and continued softness in the economy that the company sees. We expect to see weaker subscriber additions for competitors like Comcast ( CMCSA ), DirecTV ( DTV ) and Dish Network ( DISH ). If this fails to materialize, then perhaps the company is facing some specific issues regarding its strategy and tactics.

Even though Time Warner Cable witnessed net subscriber losses, this quarter further strengthens the fact that broadband is getting increasingly important and should act as a hedge against pay-TV competition and a consumer shift to Internet.

Our price estimate for Time Warner Cable stands at $71.50 , which is slightly below the market price.

Broadband Positives - Growing Subscribers, Growing ARPU, Bundling Options and Hedge

Although, there were net losses, let's take a look at the bright side… Time Warner Cable continues to grow its broadband subscribers as well as average fee per subscriber.

Broadband is benefiting from high demand for higher broadband speeds. In addition to this, the company plans to explore bundling wifi with wireline services. In essence, even though video subscriber losses may have been higher this quarter, the long-term strategy of focusing is promoting its broadband along with the digitization of cable.

The cable business is has historically been viewed as a quasi-infrastructure play, and therefore, a good hedge against pay-TV competition and alternative video services like Netflix ( NFLX ) is to promote broadband subscriptions. The new bundling options might give incremental boost.

See our complete analysis for Time Warner Cable

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


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

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