About Holdco, LLC

Time Warner Cable (TWC) makes coaxial quiver. The company is the #2 US cable company, after Comcast, with operations in more than two dozen states across the country. It serves more than 15.2 million mostly residential customers (about 625,000 business customers) with video, high-speed data (primarily through ISP brand Road Runner), and voice offerings, as well as security and home management. In addition to video, voice, and data, other business services include networking and transport, outsourced IT, and cloud computing. In February 2014 rival Comcast moved to acquire TWC for some $45 billion in stock.

Change in Company Type

Comcast's pending acquisition of TWC would combine the nation’s two largest cable companies, which have been facing stiff competition from less expensive pay TV alternatives such as Netflix, Hulu, and Apple TV. To combat any antitrust concerns, Comcast will divest about 3 million subscribers (which will most likely go to Charter Communications) in order to keep its market share to less than 30%. The two companies say the merger will save some $1.5 billion in operating efficiencies and finally give Comcast access to TWC's hold on the New York City market. If approved, the deal is expected to close by the end of 2015.

Operations

TWC also operates a local news broadcasting station in New York  and two Los Angeles regional sports networks, as well as a news, sports, and entertainment online portal.

The company generates more than 80% of revenue from its residential services; business services and advertising account for about 15% and 5%, respectively.

Geographic Reach

Its core service areas are located in New York, the Midwest, Texas, the Carolinas, and southern California.

Sales and Marketing

TWC markets its products and services via a host of direct channels (online, telemarketing, e-mail marketing, door-to-door sales), as well as through third-party partners and retailers. In 2014 TWC served approximately 10.8 million residential video subscribers, 11.7 million residential high-speed data subscribers, 5.3 million residential voice subscribers and 85,000 Intelligent Home customers. The Company spent about $684 million on advertising in 2014 compared to $676 million in 2013.

Financial Analysis

The company has seen strong revenue growth over the last decade. Sales in 2014 rose 3% to $22.81 billion on higher business service revenue from the of inclusion revenue of DukeNet (an acquisition) as well as and growth in high-speed data and voice subscribers. Election year advertising drove advertising revenue higher. The residential services segment saw an increase in high-speed data revenue, which was partly offset by decreases in video and voice revenue.

The higher revenue translated into a 4% rise in net income, to $2.03 billion in 2014. Cash flow from operations has been steady over the past several years; in 2014 it rose $597 million to $6.3 billion.

Strategy

Growth in TWC's residential operations has slowed in recent years as it operates in mature, competitive markets. The company seeks to extend its services to mobile devices and to non-TV devices to help it retain and gain customers. In a deal with Microsoft, TWC will make its TV app available for the Xbox One video game and entertainment system. Consumers with an Xbox Live account will have access to free and subscription On Demand titles. TWC teamed up with Boingo to provide Passpoint roaming access to their subscribers. Qualified TWC Internet customers and Boingo subscribers can connect to secure WiFi networks at thousands of locations, including 25 high traffic airports in the U.S.

Expanding options for its customers us important as alternatives to cable and satellite TV profilerate. While TWC carries nascent competitors such as Netflix and Hulu via its ISP, such services could eat into TWC's more profitable cable business. Another potential problem for TWC is the Federal Communications Commission's vote to regulate the Internet like a utility. That could prevent TWC and its competitors (or eventual partner, Comcast) from finding sources of revenue in different tiers of service.

The company is focused on improving the quality and reliability of its residential products and offering distinguished customer service. TWC expects to see continued strong growth in its business services segment; it predicts revenue of more than $5 billion from those offerings by 2018.

Mergers and Acquisitions

Acquisitions have played their part in TWC's strategy. In 2014, the company closed its acquisition of DukeNet Communications. The $600 million purchase bolstered TWC's business services wholesale transport offerings by adding some 8,700 route miles in the southeastern US to the company's fiber optic network.

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Holdco, LLC

13820 Sunrise Valley Dr
Herndon, VA 20171-4659
Phone: 1 (703) 345-2400
www.rr.com

Stats

  • Employer Type: Public
  • V Pres: Jim Brueneman
  • Cfo: Clay Carey
  • Pres: Jeff King

Major Office Locations

  • Herndon, VA

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